NZ economy slows, dragged down by construction and manufacturing

Thursday, 20 December 2018

New Zealand's economy has slowed sharply in recent months, recording the weakest quarter of growth in almost five years.

Statistics New Zealand said on Thursday that in the three months to September 30, New Zealand's gross domestic product (GDP) grew by 0.3 per cent, well below the 1 per cent expansion in the June quarter.

Weighed down by a fall in food manufacturing,  and ongoing weakness in the construction sector, it was the weakest three months period since December 2013.

Infrastructure investment and gross fixed capital formation - a measure of how much businesses are investing - both fell, but remain positive for the year to September 30.

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The primary sector grew strongly, expanding by 2.2 per cent, while the services sector grew but at a slower pace than in recent quarters.

GDP growth per capita - the amount the economy grew per person - was zero in the September quarter.

Economists predicted that the economy would show some sign of slowdown after the unexpectedly strong June figures, however most predicted quarterly growth of around 0.5 per cent.

The weak September quarter means that the economy has expanded by 2.6 per cent since September 30, 20017, the slowest annual expansion since the end of 2013.

'Short of expectations'

Westpac senior economist Michael Gordon said while the September quarter was expected to show slower growth than June, the figures were weaker than either financial markets or the Reserve Bank were predicting.

'There were … some factors that proved less positive than we expected, although these in turn are not likely to have a lingering impact on growth,' Gordon said, with the expected rebound in mining likely to simply reflect a delay, while the slowdown in road repairs after the Kaikoura would not be a recurring drag on growth.

Thursday's figures also revealed that New Zealand's economy grew more quickly during 2017 than previously thought.

Statistics NZ revised each quarter of growth upwards, meaning it now estimates the economy grew by 3.4 per cent in 2018, up from the 2.8 per cent it previously believed.

ASB chief economist Nick Tuffley said the economy had been stronger than believed in 2017.

'Today's figures paint a picture of an economy which had very good momentum, which then slowed quite sharply into the second half of 2018.'

National Party finance spokeswoman Amy Adams said the economy appeared to have cooled, with the growth not strong enough to cover population growth.

'Despite all the Government's talk of wellbeing, that means New Zealanders are becoming worse off. While quarterly numbers can be volatile and need to be read with caution, these latest figures do suggest a general slowdown from the economy the Government inherited from National,' Adams said.

'These results will cause embarrassment to the Minister of Finance after he was too quick to boast about the previous quarter's result, which now appears to be an outlier.'