Services boom lifts economy 2.9pc
"We expect growth to remain at a more subdued pace this year." Westpac economist Michael Gordon
A booming services sector helped the New Zealand economy grow almost 3 per cent in 2017.
Statistics New Zealand figures show the economy grew by 0.6 per cent in the final three months of
2017, a period that covered election uncertainty, falling business confidence and dry weather.
The economy grew by 2.9 per cent for 2017 as a whole, up from
2.7 per cent in the year to September 30, 2017.
The figures, out yesterday, were weaker than what was expected, with most economists predicting the economy would grow 0.8 per cent in the quarter.
Growth was driven mainly by the services category of the economy, which makes up two-thirds of gross domestic product (GDP).
Statistics NZ said business services grew by 2.3 per cent in three months, led by computer system design and advertising and marketing.
Wholesale, retail, rental and real estate services also grew strongly during the period.
‘‘Household spending was up 1.2 per cent in the December 2017 quarter, as households ate out more and spent more on groceries and alcohol,’’ the government department said in a statement.
Meanwhile, the primary sector contracted at the end of 2017, potentially hit by New Zealand’s hottest summer on record.
Overall agricultural production fell by 2.7 per cent, with lower milk production hitting dairy manufacturing and dairy exports, which fell 4.4 per cent.
Westpac senior economist Michael Gordon said New Zealand’s growth at the end of 2017 was hit by dry weather, which was likely to continue into early 2018 ‘‘as milk collections so far this year have remained well down on last season’’.
The growth is more modest in comparison with the growth in New Zealand’s population, which has been propelled by strong migration gains.
Statistics NZ said GDP per person increased by 0.1 per cent in the final three months of 2017, and by
0.7 per cent for the full year. ‘‘This is the lowest rate of GDP per capita growth since 2011.’’
Gordon said the economy had lost some momentum since hitting
4 per cent growth in 2016.
‘‘We expect growth to remain at a more subdued pace this year, as the new Government’s policies – particularly around cooling the housing market – are expected to be a drag on activity on balance, at least initially. The effects of higher fiscal spending are more likely to be felt in 2019 and beyond.’’
ASB senior economist Jane Turner said that, other than the weather-related hit to agricultural production, the picture was ‘‘relatively robust, with many sectors growing stronger than we expected’’.
ASB is forecasting a slowdown in growth in early 2018, before a recovery.
‘‘We expect a temporary slowdown in growth over the first half of 2018 due to initial uncertainty following the recent change in government,’’ Turner said.
‘‘But the details in [fourthquarter] GDP are encouraging and lift our confidence that economic growth will recover over the second half of this year.’’