GDP still on plus side
New Zealand’s gross domestic product (GDP) grew 0.5 per cent in the three months to the end of June, confirming fears of a slowdown.
The annual growth was 2.1 per cent, Statistics NZ reported, which is the lowest annual growth rate since June 2013. However, the figure was towards the upper end of analysts’ expectations.
Westpac said it meant no change to its forecast of the next change to interest rates being a 25 basis point cut in November that would take the official cash rate down to 0.75 per cent.
Deputy Prime Minister Winston Peters warned on Wednesday the economic growth figure would be ‘‘down’’.
But he indicated the Government was not to blame, pointing to a speech he made in 2017 when he decided to form a government with Labour in which he warned of ‘‘dark days ahead’’.
‘‘A whole host of things’’, including trade tensions between the United States and China were weighing on growth, but New Zealand was still performing better than ‘‘nearly every other first world country’’, he said.
Statistics NZ has previously reported the inflation rate at 0.6 per cent in the June quarter and 1.7 per cent over the year, while the country’s population also grew 1.6 per cent over the year.
Market expectations were for the GDP number to come in between 0.2 per cent and 0.6 per cent. BNZ was anticipating 0.3 per cent growth, while Westpac forecast a 0.6 per cent gain.
ASB forecast GDP growth between 0.3 and 0.4 per cent but hedged its bets last week by tipping a 30 per cent chance that the figure would be below zero and that the economy would have shrunk.
Statistics NZ national accounts manager Gary Dunnet said the economy in ‘‘annual current price terms’’ hit a milestone during the quarter, topping $300 billion for the first time. ‘‘It took about 14 years for the economy to go from $100b to $200b, and nine years to reach $300b,’’ he said.
Service industries were the main contributor to GDP growth during the three months to the end of June, rising 0.7 per cent ‘‘off the back of a subdued result in the March 2019 quarter’’, Dunnet said.
But the goods-producing part of the economy declined 0.2 per cent, driven by declines in manufacturing and construction. ‘‘This quarter, lower investment in non-residential building and a decline in food, beverage, and tobacco manufacturing led to the falls,’’ Dunnet said.
Westpac senior economist Michael Gordon noted that when annual GDP growth was last at 2.1 per cent in 2013, population growth was ‘‘slower than it is today’’. In per capita terms, annual growth slowed to 0.5 per cent, its lowest since 2011, he said.
But the growth, while slightly below Westpac’s forecast, was above market expectations, Gordon said. ‘‘The mix of growth for the quarter was broadly as expected. Food, manufacturing, mining and construction eased back after large gains in the previous quarter, while agriculture and services picked up after weak March quarter results.’’