GDP up 0.8%, more than expected

NZ economic growth 0.8% in September quarter, above economists' expectations for 0.6% rise; Led by manufacturing sector

22nd Dec 11, 10:56am by Alex Tarrant

New Zealand’s economy grew 0.8% in the three months to September on the back of a strengthening manufacturing sector, and Rugby World Cup activity, figures released by Statistics New Zealand show.

That was higher than median economist expectations of 0.6% growth in Reuters and Bloomberg surveys, and well up on 0.1% growth in the June quarter.

Annual figures show GDP growth of 1.3% in the year to September, up from 1.1% in the year to June. This was equal to growth in the year to December 2010, and both are the highest annual growth figures since 1.6% growth in the year to September 2008.

Meanwhile, growth figures for the end of 2010, and beginning of 2011, were revised down by Statistics New Zealand in today’s release, indicating the economy did not recover as well as thought following a 0.1% contraction in the September 2010 quarter.

December 2010 quarter GDP growth was revised from 0.6% to 0.3%, while March 2011 quarter growth was revised from 0.9% to 0.7%.

Manufacturing boost

Manufacturing activity rose 2.3% during the September quarter from June, which was the main contributor to a 0.8% rise in activity in goods-producing industries. Offsetting manufacturing growth was a 2.2% fall in construction activity over the quarter.

“The increase in manufacturing activity is the largest rise since a 4.1% increase in the December 2009 quarter. The latest rise follows a fall of 0.8% in the June quarter,” Stats NZ said.

The largest contributor to the increase in manufacturing activity was food, beverage, and tobacco manufacturing, up 6.3%, which had the largest quarterly increase since the September 2002 quarter, Stats NZ said. The latest rise was partly due to increased manufacturing of meat and dairy products.

Construction slumps

The 2.2% decline in construction activity over the September quarter dragged it to the lowest level of activity since the June 2002 quarter, Stats NZ said.

“Within construction, falls were recorded in construction trade services, non-residential building, and non-building construction (which includes roads, bridges, and other construction),” Stats NZ said.

Mining up, Ag down

Primary industries growth slowed during the September quarter, with 0.5% growth down from 1.7% growth in the June quarter.

“The main contributor to the latest increase was a 6.2% increase in mining activity, mainly due to a rise in oil and gas extraction. This is the first quarterly increase in mining activity since a 5.6% increase in the June 2010 quarter,” Stats NZ said.

Agriculture activity declined 1.1% during the September 2011 quarter, due to decreases in both dairy and livestock production. This was the first decline in agriculture activity since a 2.7% fall in the June 2010 quarter.

World Cup boost

Activity in the services industries increased 0.5% in the September 2011 quarter, the sixth consecutive quarterly rise, and followed a 0.5% rise in June, Stats NZ said.

The retail, accommodation, and restaurants; and finance, insurance, and business services industries drove the latest rise, Stats NZ said.

The former rose 2.5% during the quarter, the largest since the March 2007 quarter. The latter rose 0.6% during the September quarter.

“Activity in the retail, accommodation and restaurants industry was certainly boosted by the Rugby World Cup. New Zealanders and visitors to New Zealand both contributed to that rise,” Stats NZ national accounts manager Rachael Milicich said.

Offsetting these rises were falls in wholesale trade activity (down 0.7%), transport and communication activity (down 0.4%), and government administration and defence activity (down 0.4%).

Economic growth

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Source: Statistics NZ

Source: Statistics NZ and RBNZ

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22 Comments

by MortgageBelt | 22nd Dec 11, 11:11am 1324505501

The good news just keeps coming

by SK | 22nd Dec 11, 11:14am 1324505677

@this rate all the kiwis will be coming back + a load of australians who dont work in mining!

by Hard worker | 22nd Dec 11, 11:44am 1324507487

Lets go out and buy a house everyone.

by Gummy Bear Hero | 22nd Dec 11, 12:13pm 1324509211

Boring ! ....... where's the fun in that , where's the pizzazz ....

.. .. dude , let's run out and start a business , or buy one ......

Manufacturing is on a roll , dontcha know ....

by Stephen Hulme | 22nd Dec 11, 11:58am 1324508314

Nominal GDP rose 6.17% in the year ending Sep '11 compared with the year ending Sep '10.

Why wouldn't foreign debt rise NZD 18 billion.in the Sep '11 quarter to a record NZD ~272 billion?

Why wouldn't the current account deficit be on the rise?

Because the average cost to the government of repaying borrowed capital is anchored @ 5.52%..

And idiots who lend to the banks on a 12 months basis get 4.00% at best.- negative carry.

You would also be an idiot if you didn't get into debt as it costs next to nothing to repay.

Read the theory here and here.

But hey that's the way we live - thinking Greece will never come. .

by robby217 | 22nd Dec 11, 3:15pm 1324520124

Thanks for those articles.

On another note, little wonder why MS is buggered. 2 pages of research note and 2.5 pages of disclaimer !

by Chris_J | 22nd Dec 11, 12:23pm 1324509806

Statistics NZ figures are unbelievable.

Surely demonstrated by 0.5% of revisions (or nearly half the years growth) in just 2 quarters.

I am still perplexed how Christchurch can have about 20,000 homes become effectively unrentable/uninhabitable and a large portion of its commercial buildings lost and even more under semi permanent cordon (all up equivalent to at least $1b per annum in lost revenue) which should have cut at least 0.5% off GDP in the March quarter, then you have a city shut down for at least a third of a quarter (which you would expect to have cut GDP by 3% for that quarter (1/3 of ChCh's GDP, so about 1/3 of 10% of NZ's GDP), and then you have perhaps $10b worth of uninsured assets lost, $30b in total assets, and that doesn't affect gross capital formation?

So with all those negatives GDP still managed to be up a revised 0.3% in the March quarter? It's so totally unbelievable. I would have expected the interruption alone of the city being shut down in February/March would have cut 1% off GDP for the quarter (most of which would be recovered in subsequent periods, but it did nothing of the sort, apparently.

The permanent loss of assets should propbably have dented GDP by a solid 0.5% or more, but again nothing of the sort.

Then the migration loss should have impacted too, yet again the Stats are blissfully unaware and we have positive GDP.

I note looking Treasury's numbers (accounting for the change in GST), the net GST collected in the March 2011 quarter was 7.5% less than in the March 2010 quarter.

My view is that Stats NZ have pretty much kept all of their methodology unchanged, while major events reshaped the economy.

by Matt in Auck | 22nd Dec 11, 12:47pm 1324511258

Chris J - interesting thoughts.

Here's a question - despite the post quake disruption to business, would we really expect it to have a big effect on national GDP (ie. 1%), when the Chch economy is a small part (10%?) of the national economy?

But by the same token, if that is the case, how can we expect even a moderately strong rebuild to boost national GDP to a large extent, as economists are predicting ?

by speckles | 22nd Dec 11, 9:55pm 1324544120

With regards the Christchurch economy, post Feb EQ and pre election, a lot of money has been spent on a very wide range of new economic activity with questionable enduring benefit or sustainability.... which did offset to some degree the loss of existing pre quake economic activity. i.e from demos, drainage patch ups, temporary road repairs and in the area of social development, especially money for needs assesment and consulting etc.

If you believe the stats, Christchurch economy contracted only 1.8%, however lost approx. 30,000 jobs & 6,500 people from the wider Canterbury region post EQ. So the new activity must collectively be substantial if you take the stats. as read.

by Chris_J | 23rd Dec 11, 11:12am 1324591929

It's all depends who's doing the calculation. According to the Press, the NZIER reckon that ChCh's GDP was down 5-7% over the year to September 2011.

That seems a more realistic figure.

However I wouldn't be surprised if it were even higher than that. Anyone who seriously believes only 1 or 2% was lost from ChCh's GDP is simply dreaming.

But even if the figures are as good as Stats NZ believe:

Growth during 2010 calendar year was just 0.8%PA, and since the start of 2008 (15 quarters) growth has averaged minus 0.09%PA so the size of the economy today is actually 0.33% smaller than it was on December 31 2007.

And wait until they finally realise the stuff up in calculating post EQ GDP and have to revise the figures down by about 1 full percentage point or more.

The moral of the story is, if it feels like a recession - then it probably is.

by Matt in Auck | 22nd Dec 11, 2:08pm 1324516136

Good Brian Fallow article in the herald today.

Govt want to reduce Govt spending at 35% of total GDP now to 31% of total GDP over next couple of years.

They plan to achieve that based on fairly optimistic GDP growth, and cuts in spending.

What happens if GDP growth is only 50-60% of their projections, as I expect? Of course the answer is they will cut spending further, pushing the economy down further

vicious vicious cycle

and Aus unemployment is project to rise significantly in the next year:

http://www.adelaidenow.com.au/australia-in-the-grip-of-a-jobs-crisis/story-e6frea6u-1226228157542

so there will be less kiwis moving to Aus for work, this will place more pressure on employment in NZ in a low job growth environment, unemployment goes up, govt costs go up......etc

see where this is leading??????

by Matt in Auck | 22nd Dec 11, 12:44pm 1324511057

the tyranny of modelling!

sounds so scientific and robust, but so often fails to account for complexity

by ngakonui gold | 22nd Dec 11, 12:55pm 1324511751

No doubt a rise in alcohol consuption during the world cup helped these figures.

Something a kiwi can be proud of at last.

Did they minus the amount it cost to enforce the law during this time.

by David George | 22nd Dec 11, 1:53pm 1324515184

"Did they minus the amount it cost to enforce the law during this time."

Nah mate, that's added to GDP, same as all government spending. In fact, take out government spending borrowed money and you get a very differant picture. How about some figures with government (central & local) spending stripped out. Chris-J says GST receipts are well down, so what is happening with the private sector?

by Kunst | 22nd Dec 11, 2:09pm 1324516164

I’m wonder in what position New Zealand will be, when trade wars intensify and increasingly the end of globalisation occurs ? Are we prepared ?

by Stephen Hulme | 22nd Dec 11, 2:33pm 1324517607

@ Kiwidave - How about some figures with government (central & local) spending stripped out.

How about some GDP figures minus corporate (banks included) repatriation of profits off shore?

We used to publish such data under the moniker of Gross National Product (GNP) - but they were so embarrassing we, they, government decided to suspend their publication.

by skudiv | 22nd Dec 11, 3:08pm 1324519695

1.3% annual growth! Steaming ahead then. Too bad govt debt is growing 600% faster.

by skudiv | 22nd Dec 11, 3:10pm 1324519806

Forgot to mention, the yet to be announced downward revision.

by Stephen Hulme | 22nd Dec 11, 3:12pm 1324519951

Yep - it's a debt financed ponzi scheme.

by prosperopink | 23rd Dec 11, 8:00am 1324580418

The Keynes economic system can be likened to Martingale, who devised the double down system for gambling.

You double your bet each time you lose. The only way you can lose playing the system is when you run up against the house limit, you need to bet a trillion, but the house will only let you bet 500B. In the economic world if you bet/borrow a trillion you need to capture a trillion in economic growth, and there is no guarantee of that, in fact it seems increasingly unlikely that the economic growth of the past fifty years will resume, ever.

by skudiv | 23rd Dec 11, 8:07am 1324580864

Don't frown, double down!

by jackp | 23rd Dec 11, 1:40pm 1324600834

A good part of that was the RWC. Why is everyone so excited, gosh a whopping .8 percent. Don't forget what it said about stocking up for Christmas sales.. This government will bloat that figure to find excuses to say what a wonderful job they have done. They haven't.