GDP bounced back 3 per cent in final quarter of last year

Thursday, 17 March 2022

New Zealand cranked up economic activity in the final quarter of last year despite some lingering Covid restrictions.

New Zealand’s GDP, which is the main measure of activity in the economy, jumped 3 per cent in the final quarter of last year, Stats NZ says.

The rise was mainly due to consumers opening their purse strings, with household consumption climbing 5.2 per cent, but investment in the likes of plant and machinery also jumped by just over 11 per cent in the quarter.

Finance Minister Grant Robertson said “the robust economy” and the country’s strong fiscal position meant the Government was in a good position to assist people who were impacted by increases in the cost of living.

But Act Party leader David Seymour said the GDP figure was “already out of date”, describing it a small bump in a “downhill road” between last year’s Covid lockdown and this year’s “virtual lockdown”.

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ASB was also downbeat.

The economy’s resilience through the Covid pandemic had been very impressive, “but this quarter’s result isn’t the sort of dramatic over-performance we’ve become used to and hints at broader headwinds set to deepen”, it said in a research note.

New Zealand is one of the last developed countries to report its GDP figures each quarter and the time lag reduces the value of the data in helping determine future interest-rate settings and other policies.

Nevertheless, it is an input that the Reserve Bank can consider when weighing up whether the economy may be running too hot or too cold.

GDP had fallen 3.6 per cent in the prior September quarter due to Delta lockdowns, slightly revised data from Stats NZ found.

The Reserve Bank had tipped a 2.3 per cent bounce back in the December quarter, while ANZ had forecast a 3.5 per cent rise.

The quarterly rise in GDP took the annual increase in GDP in 2021 over the previous year to 5.6 per cent, after a revised 2.1 per cent drop in 2020 that was caused by the Covid pandemic.

Stats NZ manager Ruvani Ratnayake said households spent more on goods and services in the final three months of last year, “particularly on durable items such as clothing and footwear, and electrical appliances”.

But there are strong signs the economy has since turned south, though stronger inflation means the central bank is expected to keep raising the official cash rate regardless.

ANZ chief economist Sharon Zollner warned on Thursday that the “party is over” for the economy.

“It is a pretty unpleasant mix for central banks, with weakening activity, but still rising inflation pressures,” she said.

“Reality is starting to bite. We are going to see households really pull their heads in this year.”

On Wednesday, Stats NZ reported that New Zealand’s current account deficit had ballooned out to a record $20.2 billion in 2021 after a particularly weak trade performance in the fourth quarter.