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NZ economy grew 0.8% in March quarter, GDP figures show, well above market expectations for 0.4% growth; 2nd half of 2010 not as bad

NZ economy grew 0.8% in March quarter, GDP figures show, well above market expectations for 0.4% growth; 2nd half of 2010 not as bad

By Alex Tarrant

New Zealand’s economy is in better shape than was thought, with economic activity rising 0.8% in the March quarter, double market expectations, figures released by Statistics New Zealand show.

Reuters and Dow Jones Newswires surveys of economists put the median expectation for GDP growth at 0.4% in the March quarter from December, while a Bloomberg survey pointed to growth of 0.3%.

The New Zealand dollar jumped sharply following the figures, touching 85 US cents from 84 US cents just before the release. Economists hardened their forecasts for a hike in the Official Cash Rate as soon as December. Some suggested an earlier rate hike and a larger first rate hike was now possible.

The Reserve Bank of New Zealand and Treasury had both picked quarterly growth of 0.3%, meaning expectations for the next hike in the Official Cash Rate should lean further toward a 25 basis point hike in December 2011 as opposed to March 2012.

Meanwhile, the slump in economic activity from March 2010 was not as bad as initially thought, with Stats NZ revising growth figures from June to December upward. June quarter GDP growth was revised from 0.1% to 0.2%, September quarter from negative 0.2% to negative 0.1%, and December activity from 0.2% to 0.5% growth.

Annual figures show GDP grew 1.5% in the year to March 2011, above expectations of 1.2% growth.

Manufacturing activity led the way in the March quarter, rising 3.6%. Large increases were seen in machinery, metal product, and food and beverage manufacturing, Stats NZ said.

Real estate and business services activity also helped push up the headline figure, rising 1% over the quarter due to increases in business services activity. Wholesale trade rose 1.5%, its sixth consecutive increase, Stats NZ said.

The biggest downside to growth came from construction activity, falling 4.3% over the quarter due to decreases in both residential and non-residential building.

Statistics New Zealand had delayed the release of March GDP figures as it sought to ensure it had properly taken into account the effects of the February 22 earthquake in Christchurch. In a release, Statistics New Zealand said that additional analysis showed GDP was being measured accurately at the national level, despite the disruptions in Canterbury.


Finance Minister Bill English said the GDP figures came amid signs the pace of the recovery was picking up.

“The Government has moved swiftly to provide financial certainty for rebuilding Canterbury, and this will have a positive impact on the economy as this work gets underway," English said.

“The rebuild, along with near record commodity export prices, interest rates at 40-year lows, improving business and household confidence, lower household debt and the upcoming Rugby World Cup, give us confidence in the outlook for New Zealand’s economy," he said.

“We’re also confident this recovery will be built on a sound platform of higher savings, exports and productive investment, rather than the excessive borrowing, consumption and government spending of much of the past decade.

Earlier and bigger rate hike?

ANZ economists said the result was much stronger than the market and the Reserve Bank had forecast.

"There were also upward revisions to historical data. In combination with the stronger than expected Q1 GDP outturn this implies the level of economic activity is far higher (1.1 percent) than the RBNZ assumed in June. · Though the Q1 GDP data is dated (we are now at the start of Q3 after all), it still has important implications for monetary policy. December remains our core view for the first rate hike. But the risks of a 50bp hike first up, or even an earlier move, has risen," ANZ said.

Westpac economists said economic activity was responding to low interest rates, high commodity prices, stable house prices and some inward migration.

"For the RBNZ, evidence of a robust economic recovery, combined with a resurgent housing market and high inflation expectations, strengthens the case for resuming rate hikes," Westpac Chief Economist Dominick Stephens said.

"Our view remains that the next OCR hike will be in December this year, subject to how market conditions pan out in coming months. The high exchange rate will do some of the work in containing inflation pressures, and a range of unresolved sovereign debt concerns in the Northern Hemisphere could still prove to be a spoiler for the global recovery," Stephens said.

RBNZ behind the curve?

BNZ economist Craig Ebert pointed out the GDP figures showed the economy is about 1.5% stronger than the Reserve Bank expected when it cut the Official Cash Rate on March 10 to 2.5% from 3%. He also said the hit to confidence from the February 22 earthquake was only temporary and was now strong again.

"So, we have to ask, what is the justification now for continuing to run with the record-low OCR of 2.50%, particular with accumulating risks of rising inflation, let alone the way an unduly low cash rate will delay the rebalancing process the macro-economy still needs to adopt?," Ebert said.

The Reserve Bank may point to problems overseas and the stronger New Zealand dollar as factors helping to control inflation, thus delaying the need for an early Official Cash Rate hike, economists said.

Ebert said markets now sensed the Reserve Bank was 'late' or behind the curve in raising rates.

"The “solution”, in this context, is for the RBNZ to get back “on the curve” in order to guard against a re-stretched economy with attendant core inflation pressure. We certainly believe the Bank should soon reduce its OCR stimulus, in the least, near term, the 50 point “insurance cut” it put in place just after the 22 February earthquake," he said.

"However, we also believe the RBNZ will probably drag the chain, once again, until it is eventually forced to play catch-up. This is why we have simply retained our outlook on the OCR – of a 25bp hike in December, beginning a steady string of similar increments at subsequent meetings, with a 5.00% peak in mind for early 2013. At the same time, however, we need to increase our risk assessment of the stimulus-removal process beginning earlier than December, and with some of the near-term adjustments being in 50-point licks rather than 25."

Earlier hike

ASB's economists said they now expected the RBNZ to lift the OCR in December, having previously forecast a January hike. "There are still many risks out in the global environment, particularly the escalating European debt crisis. But, barring flare‐up of the crisis to the point that NZ gets adversely affected, we expect the growing confidence in NZ’s recovery will prompt the RBNZ to act sooner," they said.

(Updates with NZ$ reaction, English comments, ANZ, ASB, BNZ, Westpac economist comments, link to Economic growth chart here and below)

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Annualised GDP going forward printing at 3% plus, inflation running hot and RBNZ interest rates set at emergency lows. Something does not quite compute........

Lets not jump the gun on,

1) Annualising one number...

2) also inflation is CPI and not core...same as 1) its CPI and not core inflation so its volitile, consider that tomatoes are $13 a kilo, well OK considering its mid winter, what do you expect?

3) Does not compute, yes it does, when you consider other things.

CPI, look at what is increasing, fuel, so thats a huge drag on our businesses and personal spending, its acting like a OCR hike its taking money out of our pockets. Also consider that this effect is on ppl with and without mortgages, so its wider in its negative effect.. A higher OCR would punish debtors and rise deposit rates those ppl then have more self-canceling....rising fuel isnt....

Wages, where is the wage inflation? or un-employment dropping?  virtually no higher wages, certainly at or less than core let alone CPI. So ppl have less to spend....this means as it can only be spent once other areas are being cut back....I'd like to see the DIY sector's state for instance...

External factors, EU is a basket case and its looking worse every day.  The US is starting to look like QE3 is needed...and its not going to stop at QE3...the US states are just about ready to default, un-employment is over 9% and the real number is twice that and social security is about to expire....

If there was light at the enf of the tunnel, I'd say sure increase OCR, but right now that light looks like a coal carrying freight train....and there is no where to hide or dodge.




The headline should be "GDP growth is much less then INflation".

Most references to GDP data are "real" - that is after the impact of inflation is removed. If anyone refers to GDP with inflation included, they refer to "nominal GDP".

I find this really hard to believe....

But I guess I should entrust the experts to have got it right

So if it is right, shoudn't the RBNZ be hiking the OCR now????

I think it is all going to be out of our hands soon Matt.

I started intensively reading up on economics after I finished uni last year. Look how Greece has been progressively downgraded over that time. Now that they are one above default, there is no 'progressive' left. 

There is only one play left, and we know it isn't an upgrade.

Scarfie, so theory aside , do you feel that something is happening which is , let's say , not out of the book?

Well I don't know how to answer that one, but you have to wonder don't you? When all the pieces start to line up you might say.

I did mean our local situation not realy being under our (Key, English etc)control though.

Being new to economics what I am seeing is perplexing. It seems to me that highly risky behaviour is taking place when the situation seems tenous. I mean Bernanke just has to speak a few words and the markets make major swings, what is up with that?

It isn't just Bernanke it is those in the Eurozone also.

It seems to me it is all on a knife edge, with people hanging on for any single word that might give them an advantage, or cause them to pull the pin.

Am I heading in the right direction for you?

I'm with you. I have always been more open to understanding or wantin to understand what really goes on, to do that you need many things. Some theory on the given system, know the history & alot of time dedicated to reading & learning as best you can. Having an open mind &' being plugged into humanity also helps.
When things don't add up under conventional sense, then you go looking outside of what convention might have been right.

No, its covered by Minsky, Keynes, Steven Keen and Paul Krugman to name 4..........debt and zero bound...

You need more tin foil btw.



Yippee kayay!



But wait.. need to fix my mortgage first!


Certainly are good times Chairman!!!

Gold and commodities have been amazing, best investments I ever made. Watching the morning business report everyday has been a pleasure! It ain't gonna stop any time soon either with QE111 and the Euro in a mess. I read this today, a nice summary;

Todays GDP figures and the NZD will have Bollard in a knot. Once Bollard starts lifting, the kiwi really will fly.

And just as a side show, can't wait to watch Key try and defend not introducing a CGT on investment property....oh that's right we already have a GCT, the only differnec is it's optional :)

Do you pay CGT on gold going up and how is investing in gold productive?

I never said Gold was productive, it's the PIs who harp on about their investments 'being for the good of society'. Let's be honest buddy, any investment has the sole aim of creating a return for the investor. Simple as that!

The same goes for tax. Any return on investment, intentional or not, should be taxed. Personally, I would rather pay the tax than have the IRD on my back. Ask David Henderson about his experience if you like. I would rather sleep at night.

The PIs are only crying because the rort is being exposed. To make threats of rent increases or investors taking their money overseas just shows how desperate you guys are. If you have sold in 07 and shifted your cash into gold, I don't think you would be so bothered.

"Let's be honest buddy, any investment has the sole aim of creating a return for the investor. Simple as that!"


and of course what is rational and best for you (and I dont mean you personally btw) may well be bad for NZ, but that isnt really your problem, making a living is.....


Our exporters are going to be washed out. Wake up RBNZ , START THE HIKE

You understand that hiking the interest rate will also raise the exchange rate.. as people invest in NZ currency... cause it doesn't appear that you do...

That makes it worse.....

What exporters need is a OCR drop.....then speculative money exits and the currency drops.


This has got to be a down-right lie, as it does not stack up with the obvious doom and gloom we read on this website.  Repeat after me, the NZ economy is not growing and we are heading for a melt-down (unless we win the RWC).

Dear me,

Didn't you know, it's a requirement to be a doom merchant before you are allowed to join this blog site?

Sounds unbelievable, but the experts don't get it wrong do they. Well I guess it will mean that the interest rates will now be on the rise. Good time to fix urgently if on a mortgage;.

I'd wait, in fact I am....personally I see a Depression heading our way....that means OCR staying still or dropping....

i'd suggest reading this site for the other side of the story....

but you are a grown up, make your call.


Where's the salt.

Looks like someone (big) had prior knowledge and was able to front-run the govt announcement in the FX market making a small fortune today... huge volume around 2am this morning betting on a big gain in NZD/USD cross... 

Swept under the carpet already MattS...we don't have insider trading in NZ...that would be fraud.

 John Key?? :)

The government being done by the SFO for insider trading.. I like it.. A movie is being made already as JK trades NZ fully out of debt... but is jailed for life...

cant see Bolli putting rates up for a long time - unless he wants NZD at parity with USD

0.8 growth ?    Id be interested in a bloggers  poll along the lines of  "Yes/No/Dont know -  is your business or any of your friends  actually making a decent profit after inflation or salesnoticeably busier lately ? "

I will kickoff with a big fat No

As a consumer I see sales and discounts galore.....retail staff cut back...

example, Makita weekender 185mm circular saw, normally $187 then $147 last week $129....and thats at Bunnings who dont tend to do specials...

As a specifier of products for the company I work for I see discounts, and frankly desperation, galore....I think its really really tough out there is sales boss loves it, he drives them down and then drives them down again....but what he cant see is they wont be around next time....

0.8 growth isnt real growth when you look at wholesale / materials costs rising and you cant pass that on...........

RB raisnig rates while unemployment is where it is and wages are at best stagnent seems crazy....IMHO.


It's impossible that NZ's GDP rose by 0.8%!!!

I have been reading this site for months now and I know from the financial and economic geniuses that most of you are and who contribute to it regularly and who write it, that New Zealand is on the verge of a total and utter financial and economic collapse, that will make our 30% decline in house prices look like a kiddies Christmas party.

Of course I also believe you guys, based on your track record, when you say that a CGT must be introduced immediately to save ourselves form the economic abyss.  National is leading us to doom and only the saintly Labour party and its last great hope for us all, the Dear Leader, Philus Goofy, can save us. Without the great helmsman all hope is lost!

Of course what I do know is that whatever many of you guys say, the exact opposite is going to come about!

So what exactly do you contribute?

I hope everyone ignores you.

Actually, GDP only measures transactions, not real wealth, nor real debt, nor Natural Capital debt, so it doesn't measure very much, nor matter very much.

Wonderful too see some solid growth in the economy. Hope it continues.

It will be good to see more jobs for people as a result.

Also nice to see the 'grumps' on this site complaining. The more they complain the better the economy must be.

YL - Don't you find it surprising that the people who would benefit most from a surge in GDP i.e. the productive sector have decided that this figure is bogus because the NZ50 Index is currently down 15 points.  This is especially strange considering that the US and European stock markets were all higher yesterday.  I think NZ business have given an empahitic negative reply to this particular result from NZ Statistics.

TrimChaiLatte | 14 Jul 11, 1:20pm

Good on you if you make good investment out of gold. 

Me and my small shares in a French petroliumexplorer - no, infact it's awful!  However, I haven't the bility to grow my own bxlls so I haven't venture into Gold!

This website would make for an interesting study...the only recorded instance in human nature where good news makes people grumpy.


Not me, Your Landlord! Because the GDP number indicates that the economy is indeed being rebalanced away from property ( manufacturing being the big winner in the figures) and allows a return to normal interest rates (which are higher than here). So if I've miscalled anything, it's that interest rates would go lower. I figured that the OCR at 'zero' should yeild a floating rate of 3.5%. maybe that  Christchurch 'red zone' offer was it? We'll see.

YL -   If the reported GDP figure was good news why did the NZX50 Index go down?  The main beneficiary of a rising GDP is the Business sector, who are actually saying something completely different.  Try connecting the dots, it's not that difficult.

maybe...GDP is a measure of past performance and the sharemarket is a reflection of future expectations???

Hello future grandkids - just thought I'd make this recording.

Hope you're coping with the extreme weather and the refugees, sorry about all those car wrecks. We kind of ran out of grunt about now.

But hey, we had some good news today. Better GDP than predicted. Think on that! So that makes it all OK for you.

Desn't it?


John Key at the field days said we had 20 good years ahead in agriculture. Well if you purchased lambs lately at $120 a head or beef at $1200 a head then I suspect you are feeling a little green as the NZ $ wipes your profits away. Personaly its more trying to make a choice about when to step off a sinking boat and what to step onto.

 The high dollar means all those working for the government are becoming seriously overpaid. However my ebay purchases are getting cheaper, and Im thinking its a good time to winter in Europe perhaps the UK at .53 to the pound, or should I wait till parity with the US$ and visit the north east states, so many decisions to make, one I wont be making is investing here.

How on earth did they come up with this??

Upward revisions of 0.5% plus a 0.8% gain in the March quarter.  It is so unrealistic that it is hard to believe they are talking about the same country that I'm living in.

This all sounds so incredibly unbelievable, much like their yo-yo-ing employment figures in recent quarters.

How is it possible that Yasi in Australia causes GDP to contract 1.25% while shutting down NZ's 2nd biggest city's CBD for over half of a quarter causes GDP to expand by 0.8%??

There is little doubt that I am incredulous.  Perhaps Bernard could find out what magic they performed to account for earthquake effects?

Everyone in the country seems to have their heads in the sand, believeing that they are doing a fantastic job when in fact by my reckoning the economy is tanking.

Bernard, Alex and co, is the breakdown of available of which regions had the largest GDP growth?

I've skimmed through Stats NZ release on the effects of the earthquake.  At a glance it appears that they determined the impact is neglible and therefore excluded all affected "stuff" from the calculation!

Great work there.  So it appears we have numbers that are a load of bollocks.

Note that they have no regional split in GDP calculations either!

As a former participant in CPI surveys (the properties they surveyed are all now destroyed by the quakes) I imagine that all they have done with GDP surveys is to exclude businesses that were severely affected and make estimates based on their "wider" survey of businesses.

But does this all work?  Are they including insurance receipts that businesses are anticipating (which would of course mean that for insured businesses any actual reduction would not be included in the figures).

All in all not a realistic picture of the economy.  Tougher times are still likely.


Clearly we have rediscovered phlogiston in the economic sphere. The key sector affected by the February earthquake in Christchurch was lawyers and accountants. While they were temporarily out of action the local economy went gangbusters until the bloodsuckers found new premises.


We need an equivalent movement to the libertarians promoting an economy free of professionals.

Chris_J - yes I can't believe it either.

yet this comes from the same people who predicted Auckland's CBD would need a whole lot of new schools because of all the fertile women in their 20s living in apartments, who of course were also going to have children in the next few years and keep living in the CBD!

the ignoring of the Chch stuff seems pretty suspicious

How surreal is that.

Election Approaching...

US Debt Ceiling approaching...

EU Monetary Union Cascading Failure Approaching...

Pretending New Zealand’s 2nd largest city is not a part of the New Zealand Economy....





Double Post... nothing to see here.




Well all you doubting Thomas's out there, remember blessed are those who believe and do not see.



said the" BLIND MAN'

Who Didn"t See At All :]

No surprises at all for me. Its  been boomtime down on the farm and it looks like the manufacturers into Aussie have been having a fielday as well.And theres more to come. Next year will see farmers with repaired balance sheets and the Ch Ch rebuild underway. Sorry Gloomsters!!!

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Days to the General Election: 37
See Party Policies here. Party Lists here.