Economy’s growth slower than forecast
New Zealand’s economy continues to expand but annual growth has fallen to the slowest rate since 2014.
Statistics New Zealand said yesterday that New Zealand’s gross domestic product – the common measure of economic growth – expanded by 0.6 per cent in the last three months of 2018.
The annual change from the end of 2017 was 2.3 per cent, the first time it has fallen below 2.5 per cent since the end of 2013.
Growth in recent months was driven by the services sector – the largest component of the economy – which grew by 0.9 per cent.
Household spending rose 1.3 per cent, with more people eating out and higher spending on groceries and alcohol, while retail services and accommodation also grew.
The construction sector also grew in the final three months of 2018, expanding by 1.8 per cent in the quarter, the first time the industry has expanded in more than a year.
Meanwhile activity in the primary sector fell, with agriculture, mining, forestry and logging, and fishing all declining slightly.
The growth was roughly in line with what economists had expected in the quarter, although a downward revision in economic growth in the first half of 2018 means the economy is growing slower than the Reserve Bank had predicted.
‘‘Today’s GDP figures confirm that the economy lost some momentum over the second half of last year, but not to the extent that we thought,’’ Westpac senior economist Michael Gordon said. ‘‘That gives us a bit more comfort about our view that the growth momentum will pick up again this year, supported by government spending, construction, and rising household incomes.’’
ASB, meanwhile, said it saw growing risks that the economy would grow more slowly than expected, which raised the possibility that the Reserve Bank would respond by cutting interest rates.
‘‘With GDP growth slowing over 2018 by more than the Reserve Bank had expected and with downside risks to 2019 growth accumulating, there is still the risk of an official cash rate cut in 2019,’’ the bank’s senior economist Jane Turner said.
Overall, the economy continues to grow at only slightly faster than the population increases.
Statistics New Zealand said per capita growth was 0.1 per cent in the final three months of 2018, up from a 0.1 per cent decline in per capital growth in the three months to September 30.
In 2018 as a whole, growth per capita was 0.9 per cent, which Statistics New Zealand said was the lowest since 2011.
At 2.3 per cent, New Zealand’s annual change in GDP is the same as Australia, slower than the United States, but faster than the European Union, Japan and Britain.