GDP growth disappoints
Agriculture the laggard in solid 4th quarter
Awet spring followed by a dry start to summer hit agricultural production and undermined fourth quarter GDP growth in 2017. Growth came in at just 0.6 per cent for the quarter below market expectations of 0.8 and the Reserve Bank’s forecast of 0.7 per cent.
That took GDP growth to 2.9 per cent for the year — still solid by global standards but enough of a disappointment that the kiwi dollar dropped a quarter of a cent versus the US dollar after the news.
Agricultural activity shrank 2.7 per cent in the period, having expanded 1 per cent in the September quarter.
But other parts of the economy remained robust.
“Household spending was up 1.2 per cent, influenced by people eating out more and spending more on groceries and alcohol. This was reflected in the retail trade and accommodation industry, with activity in food and beverage services and supermarkets increasing,” Statistics NZ said.
ASB chief economist Nick Tuffley said there was nothing in the numbers to trouble the Reserve Bank’s interest rate outlook.
“Aside from the sharp weather- related fall in agricultural production, the underlying detail of the Q4 GDP figures was relatively robust with many sectors growing stronger than we expected,” he said. “The RBNZ can rest assured that underlying economic demand was resilient toward the end of 2017.”
Westpac economists had picked a 0.6 per cent result for the quarter — at t he l ower end of market expectations. “The New Zealand economy appears to have lost some momentum over the course of the last year (barring any future revisions to the GDP data),” said senior Westpac economist Michael Gordon. “Annual growth peaked at 4 per cent in 2016, but slowed to 2.9 per cent in 2017. Since population growth was about the same in both years, this represents a marked slowdown in percapita GDP growth.”
Economists see that lower growth lingering — with election related uncertainty hitting business spending in the first quarter of this year.
“We expect to see slightly slower growth over Q1,” said Tuffley. “Business confidence has fallen and employment and i nvestment intentions remain low. This suggests we could see some decision making delayed, which could temporarily weigh on economic activity over the first half of 2018.” He expected to see business confidence recover as more Government policy detail is finalised.