By Bernard Hickey
Strong construction, tourism and transport sectors help GDP grow a faster-than-expected 1.1% in the September quarter.
Economists had expected growth in output of around 0.8% for the quarter, suggesting the economy is growing faster than anticipated and potentially putting more upward pressure on interest rates. The Reserve Bank had expected quarterly growth of 0.9%. However, downward revisions to previous quarters offset the surprise rise in the September, meaning economists left their forecasts the Official Cash Rate broadly unchanged.
The annual growth of 3.5% was a touch lower than the Reserve Bank's forecast for 3.7% growth because of downward revisions to previous quarters and most still expect the Reserve Bank to hold the Official Cash Rate for an extended period, possibly into 2018. The New Zealand dollar nudged 15 basis points higher in late morning trade to around 69.1 USc.
"From a monetary policy perspective, while these GDP data were somewhat above RBNZ expectations, we assess they are not sufficiently different – particularly once data revisions are taken into consideration - to alter our central scenario for the RBNZ to keep the OCR unchanged at 1.75% over the whole of 2017," First NZ's Director of Economics and Strategy Chris Green said.
Statistics New Zealand revised growth of 0.9% in each of the March and June quarters down to 0.7% per quarter.
Statistics New Zealand reported GDP in the quarter was up 3.5% from the same quarter a year ago, which was a slight acceleration from the 3.4% annual growth rate seen in the June quarter. The 1.1% growth for the quarter was up from 0.7% in the previous quarter and was the fastest quarterly growth since the December quarter of 2015.
The services sector the economy, which represents about 70% of GDP, grew 1.1% in the quarter, while the goods-producing parts of the economy grew 1.3%.
Primary industries fell 0.1% during the quarter. Household spending grew 1.6% for the quarter, having grown 2.0% in the June quarter. Services spending grew 2.0%.
“We’ve seen Kiwis spend more on domestic travel, accommodation, eating out and recreation,” Statistics New Zealand’s Gary Dunnet said.
Per capita GDP grew 0.6% in the September quarter from 0.2% in the June quarter because the population rose 0.5%. GDP per capita rose 0.9% for the year ended September after the population rose 2.1% during the year. GDP per capita in the September was up 1.4% from the same quarter a year ago.
ASB Senior Economist Jane Turner pointed to the annual growth being slightly softer than market and Reserve Bank expectations.
"The lift in growth over the first half of the year wasn’t nearly as impressive as previously thought," Turner said.
"This has implications for the extent the RBNZ can hope for domestically-sourced inflation to lift over the coming year," she said.
"It argues for the RBNZ needs to remain patient for inflation pressures to lift off lows. But does not change our OCR outlook, we continue to expect the RBNZ to leave the OCR on hold at 1.75% for the foreseeable future."
Westpac's Sarah Drought said she expected the Reserve Bank to remain on hold for the foreseeable future.
"The slightly softer starting point for annual growth is balanced against the pick-up in momentum in the September quarter, leaving our outlook for capacity pressures broadly unchanged," Drought said.
(Updated with more detail and reaction)