Well, we got the bounce back in the economy - but it was not as strong as economists had expected, which will raise questions about the immediate performance of our economy this year in the face of all manner of challenges including Omicron and the global impact of the invasion of Ukraine.
Statistics New Zealand said GDP grew 3% in the December 2021 quarter. This was a bounce-back from a revised drop of 3.6% in the lockdown-ravaged September quarter. But the bounce was weaker than economists had expected, with most of the major bank economists having expected a rise of 3.5% or more.
However, the 3% rise was stronger than the Reserve Bank had forecast, which was for a rise of just 2.3%, so the latest GDP figures are unlikely to deter the central bank from continuing an expected series of interest rate hikes this year.
ANZ senior economist Miles Workman said the 3% GDP rebound was "solid, but shy of the 3.5% rebound we had pencilled in and certainly not a full recovery to Q2 2021 levels".
"Even looking beyond the near-term wobbles associated with the Omicron outbreak, a rather potent combo of high inflation and rising interest rates (to hopefully contain inflation) is set to erode household incomes from both ends. To prevent a hard landing, a lot depends on the revival of international tourism and education, and the labour market holding it together," Workman said.
ASB economist Nathaniel Keall said the NZ economy’s resilience through the pandemic has been very impressive, "but this quarter’s result isn’t the sort of dramatic overperformance we’ve become used to, and hints at broader headwinds set to deepen".
"...While its pleasing to know that the economy retains its ability to pull off rapid turnarounds, today’s figures are already dated in light of subsequent events. More timely indicators suggest that the outbreak of Omicron in the community during March has reduced mobility and crimped a fair degree of household spending. The upshot is that growth is likely to have moderated, or perhaps even dipped slightly, during the current quarter."
Stats NZ said the services industries led the increase in December 2021 quarter GDP, driven by business services and the retail trade sub-industry within retail trade, accommodation, and restaurants.
The rise in retail trade activity was reflected in higher household consumption expenditure, which increased 5.2%.
- Service industries, which make up about two-thirds of the economy, rose 2.5%.
- Goods-producing industries, which make up about one-fifth of the economy, rose 6.5%.
- Primary industries, which make up the remainder of the economy, fell 2.2%.
“Households spent more on goods and services, particularly on durable items such as clothing and footwear, and electrical appliances,” national accounts – industry & production senior manager Ruvani Ratnayake said.
Goods-producing industries also contributed to the rise in GDP, with manufacturing and construction the main drivers.
“Higher levels of activity were seen in most manufacturing sub-industries. There were notable rises in transport equipment, machinery, and equipment manufacturing; and metal product manufacturing, with higher exports of related products seen in the quarter,” Ratnayake said.
Increased investment in other construction, residential buildings, and non-residential buildings contributed to the higher construction activity in the December 2021 quarter.
Overall, investment in fixed assets rose 11.1%, with strong contributions from transport equipment, and plant, machinery, and equipment investment.
“Growth in imports of capital goods such as transport equipment aligned with the increases seen in investment expenditure,” Ratnayake said.
The December 2021 quarter results reflected the gradual loosening of Covid-19 control measures from the level 4 alert lockdown experienced in the September 2021 quarter. The results also spanned the change in the Covid-19 prevention framework during the December 2021 quarter, from the alert level system to the Covid-19 Protection Framework (traffic light) system.
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