GDP growth dropped by 0.1% compared to the previous two quarters, coming in at just 0.5%; Per capita growth remains flat

Economic growth in the first quarter has eased slightly, with Gross Domestic Product (GDP) expanding 0.5% – in line with market expectations.

GDP per capita remains low, unmoved from the December quarter at 0.1% and 0.6% year-on-year.

The March quarter growth figure is 0.1% lower than each of the two previous quarters. As an annual measure, New Zealand’s economy grew 2.7% in the year to March.

The size of the economy is $286 billion.

The slowdown, albeit slight, was not unexpected.

Economists' consensus expectation was for half a percent increase. But Stats NZ’s growth figure came in 0.2% lower than the Reserve Bank’s forecast.

ASB, Westpac and ANZ were all picking a quarterly growth figure of 0.4%.

The figures suggest New Zealand’s economy, which for many years was one of the envies of the developed world, has shifted down a gear.

ANZ says quarterly growth figures have averaged 0.9% since 2014 – “we expect it will be difficult to achieve such strong rates of growth from here.”

One of the bank's economists, Liz Kendall, doesn't think the cycle is out in the cold just yet.

"Businesses are facing credit and capacity constraints, along with policy uncertainty and margin pressure in the face of rising costs – and these headwinds are flowing through to activity."

The numbers, especially the stagnant GDP per capita figure, will be a worry for Finance Minister Grant Robertson.

In opposition, he used that very measure to attack the Government for creating an economy of “two halves.”

Robertson has defended this criticism, levelled against him by National’s Finance Spokeswoman Amy Adams, by quoting former Finance Minister Steven Joyce – “it pays not to look at quarter-by-quarter analysis when it comes to GDP per capita growth.”

When announcing the Coalition Government in October last year, Acting Prime Minister Winston Peters warned of an impending economic slowdown.

He cited the slowdown of the housing market and the economic mismanagement of the previous Government as reasons for his prediction.

What does the data say?

Digging into Stats NZ’s data for the March quarter, the infrastructure construction sector took a hammering, down 4.9% in the first quarter following a 9.1% increase at the end of last year.

Stats NZ says this reflects the reduced rail and road activity around the Kaikoura district as main transport links reopened in December last year, following rebuilding in the aftermath of the Kaikoura earthquakes in late 2016.

Construction as a whole, including residential and non-residential housing, was down 1% for the quarter, but still up 1.4% for the year.

Aside from infrastructure construction, most other sectors in the economy are doing well.

At an industry level, 13 out of the 16 industries increased in the first quarter.

Agriculture led the charge, up 0.4%, following a 2.8% slowdown in the quarter prior.

Speaking to his post-cab press conference on Monday, Peters predicted the “sunny weather” over the summer months would put a dampener on the agricultural economy.

Household spending over the March quarter was flat, following a 1.2% increase the December quarter. This is the first quarter since 2012 household spending has not increased.

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40 Comments

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Is this really that bad ?

I mean some sectors were, or are, over-heating , we actually need a breather from such a long hard run .

And dont sight the Chinese GDP growth of 6,or 7,or 8 % as a comparison ......... they are cheating, or lying , or using some kind of Chinese arithmetic we have not yet figured out

No it isn't. So not sure what all the hue and cry was about.

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The worrisome comparison is us being at par with the OECD average growth despite our population growth running at twice the average and our unemployment rate being 1 percentage point below the average.

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And our level of household debt running at record levels, with all that mortgage credit being pumped into the economy. And now that credit growth has stalled the property market and gdp growth is stalled. I expect mortgage credit growth will soon go into reverse.

You could argue that it's harder to grow GDP with high employment - fewer people to rope into the economy and achieve growth, and those who remain out of work are likely to have below average productivity. You're right about the population growth though, and I suspect this effect should dominate the unemployment rate effect.

Exactly my point. Given the above average unemployment, labour force participation and high influx of working age migrants, the economy is clearly underperforming.

Seems that way, right? There’s been lots of credit growth and population growth

Working age immigrants with the wrong skill sets. So called 'Chefs', tourist guides and a flood of foreign students of commerce and business do not make for economic growth - just consumers needing infrastructure: activity but not productivity growth. Replace them with high skilled high paid immigrants and all might be OK.

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yes it might be that bad, ... in my view.
Its' unprecedented that we have such low interest rates at such a late stage in the business cycle...

If the economy is starting to slow now, and Global long term rates rise somewhat, or even a little, then a mild recession might very quickly unfold..

just my view..

I think the business cycle has been killed off and superceeded by the credit cycle. It doesn’t seem to matter how well business is doing, if rates raise then that’s that.

Withay,

The word is superseded.

It's farmers who super-seed

I wouldn’t expect households to continue on their spending spree as wages dry up and banks tighten up. We are yet to feel the pinch on our economic activity and current account deficit from the ongoing trade war, falling commodity prices and rising fuel prices all in the current quarter. US monetary normalisation may also have an impact on our capital inflows.
I guess we won’t be hitting the over 3% growth estimates anytime soon.

Agree, it makes you wonder what the authors of this were smoking https://www.labour.org.nz/fiscalplans-forecasts

Those were based on Treasury estimates.

Ironic that Twatford called them "kids".

Please use the correct spelling of his name - it doesn't do your argument any good.

Well, at least there's some humour left in the brown-cardy set who compile these stats (here, BTW):

A fall in spending on new and used motor-vehicle purchases was likely the result of the reduced availability of cars after stink bugs were detected in car shipments.

Cue Winstone Gander blaming the Previous Lot, and Evil Weevils (Is Weevily Wheat next?)

If China doesn't run a surplus with the USA will it affect Chinese growth rates?

Why does China have a 700 m barrel of oil stockpile?

The oil price is controlled by Wall street and the big oil companies using Saudi Capital, China is going to change this, going into collaboration with India creating buying block, China has created a futures contract the intention being to create an oil benchmark controlled by buyers. US energy dominance has created a $ that is oil backed.

Are we stuck in a long period of very low growth, like Japan?
https://www.bloomberg.com/news/articles/2018-01-18/kings-of-oil-rethink-...

I wouldn't mind NZ matching Japan's per capita wealth nor their continuing productivity growth (despite an aging population and minimal immigration). Who cares if GDP is stagnant if the average per capita increases and whatever new wealth is shared.

Exactly, whats the point of a 'rock star' economy if 80-90% of the populations living standards and disposable incomes are decreasing? Meanwhile infrastructure is being overwhelmed by immigration and government/councils have their hands out wanting more money from Johnny rate/taxpayer to pay for it all. Only upside is 'if' you own a home you can borrow more money against it to fund your lifestyle and feel wealthy. The bulk of the population would be better off in a Japan type economy.

This is the CoL awesome economic transformation.

....yawn

They haven't done their real damage (regressive industrial relations) yet, nor has oil and gas decision fall-out really started to impact. This is just the dramatic foreshadowing of the consequences of the havoc they seek to wreak.

Absolutely, the policies we've followed for the last 6 months are clearly disastrous and have eclipsed the Gilded Age / You've Never Had It So Good / We're All Wealthier Because of Houses we've endured for the last decade or so.

I also blame the migrants who clearly haven't worked hard enough to support us recently and need their working conditions reduced. The thrashings will continue until morale improves.

Up with the B-Team.

Relax, they're going to pay a bunch of public servants to dig holes (but not for oil) and fill them in with painted rocks. They'll call these teams of people working groups.

Stagflation next?

This per capita/productivity situation is a real stinker.

Mebbe a few a them Stink Bugs are still on the loose, wreaking havoc with statistics ever' which way....

The per capita GDP is the alarming concern given our high immigration % (basically importing consumers)

If you add to that, how much growth has been reliant on natural disasters over the last 5 years, you have to start wondering where the future growth is going to come from. Definately not from more uber drivers.....

Climate change researchers tell us that increases in damaging weather events are to be expected. We are lagging behind the northern hemisphere but there are hints that is changing.

So we are crossing our fingers hoping for weather events in the search for growth......

Economic growth (so to speak) built on a foundation of natural disasters, twice the OECD norm immigration, house prices and cheap credit. A firm foundation of sand.

2018 lows for the NZD following the GDP print. Mid 60's here we come?

Lucky we don't pay for oil in USD /sarc

So is GDP growth per capita measured in real terms? If it is 0.1% for the quarter and 0.6% for the year (well below cpi of 1.1% per annum) then doesn't that mean it is actually shrinking?

GDP is presented in real terms.

Um, no it's not. :)

https://www.economist.com/briefing/2016/04/30/the-trouble-with-

A measure created when survival was at stake took little notice of things such as depreciation of assets, or pollution of the environment""

nor of outright depletion....,

...

A comment like this from someone who thinks they know so much.

Firstly, it's real terms. Pretty hard to talk about output growth in nominal terms.
Secondly, CPI has nothing to do with GDP.

Record debt, does not make you.."Record Rich"..even if you were the Recording Star....and owned property in NeverNeverland.

https://www.quora.com/How-did-Michael-Jackson-die-poor-with-so-much-debt

This is my Friday Joke...borrowed from Quora....Hope they do not mind...

Funny peculiar.

Debt is one thing, Stupidity is another, it has end-less possibilities. When is enough, not enough?.

One fling is certain, "I'm Bad, I'm Bad"....borrowed from here to eternity.

When he had so much 'Beatle juice"...why bother.?