17 Dec 2020

GDP figures show economy rebounds from recession

2:59 pm on 17 December 2020

The New Zealand economy has rebounded from recession with record quarterly growth driven by surging consumer spending, a hot housing market, and strong exports.

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Photo: RNZ / Rebekah Parsons-King

Official numbers show gross domestic product (GDP) rose a seasonally adjusted 14 percent for the three months ended September, after contracting by a revised 11 percent in the previous quarter. The consensus of forecasts was for a rise of about 13.5 percent.

"Even though activity across the country largely returned to pre-Covid-19 levels, we haven't recouped all the activity or production lost as a result of the lockdown in the June 2020 quarter," Stats NZ senior manager Paul Pascoe said.

The economy's annual average growth rate was -2.2 percent.

The strongest parts of the economy were retail and accommodation, up 42.8 percent, construction which gained 52.4 percent on the surge in new house building, and manufacturing, which was up 17.2 percent.

However, industries more reliant on international tourism and foreign students, such as hotels, bars, and restaurants were still well behind where they were a year ago.

Finance Minister Grant Robertson credited government policies such as the wage subsidy as important in supporting activity and growth, but cautioned there were still challenges.

"The full economic effects of Covid-19 are still to be felt in New Zealand and across the world. The Government will continue to work with businesses and workers to cushion the blow and support job retention and creation."

An economist said the surge in growth was nothing short of "phenomenal".

"The key question going forward is whether the Q3 momentum can be sustained. Early Q4 indicators look promising, particularly retail spending and housing-related sectors," ASB senior economist Jane Turner said.

New Zealand's growth rebound was markedly better than Australia's 3.3 percent and the US's 7.4 percent gain, but just below the UK's 15.5 percent increase.