GDP data shows NZ economy continued to slow in June quarter

Newstalk ZB, NZ Herald,
Publish Date
Thursday, 19 September 2019, 4:41PM
(Photo / Getty)

New Zealand's gross domestic product (GDP) lifted by 0.5 per cent over the June quarter, for a 2.1 per cent gain over the same quarter of last year, but in line with a general slowdown in economic activity.

The gain compares with a 0.6 per cent rise in the March quarter, which made for a quarter-on-quarter rise of 2.5 per cent.

The annual average came to 2.4 per cent in the June year, against 2.7 per cent for the March year.

A survey of 18 economists conducted by business wire service Bloomberg had put the average of expectations at plus 0.4 per cent for the June quarter, for a quarter-on-quarter gain of 2.0 per cent.

Stats NZ said the June quarter increase was driven mostly by the service sector.

Today's quarterly gain is in line with the Reserve Bank's forecast for GDP, which measures the value of goods and services produced in the economy.

In August, the Reserve Bank - recognising slower growth over the last year and increasing headwinds - cut its official cash rate by a greater-than-expected 0.5 of a point to 1.0 per cent.

"Today's figures confirmed that NZ economic growth has remained sub-trend over the first half of 2019," ASB economist Mark Smith said in a commentary.

"Given the evident cooling in New Zealand growth, the 75 basis points of cuts in the Reserve Bank's official cash rate (OCR) so far this year looked to have been warranted, he said.

"We will be closely looking for signs that the OCR cuts have gained traction and that growth prospects for the NZ economy are improving," he said.

"To date, however, signs for the second half of 2019 do not look much better."

Smith said business sentiment had remained persistently weak and consumers appeared reluctant "to do the Reserve Bank's bidding and go out and spend".

Stats NZ said the service industries, which represent about two-thirds of the economy, were the main contributor to GDP growth in the quarter, rising 0.7 per cent off the back of a subdued result in the March quarter.

Stats NZ's national accounts senior manager Gary Dunnet said the service industries recorded broad based growth, with eight of the 11 industries showing positive results in the June 2019 quarter.

Household expenditure on services saw a corresponding increase, rising by 0.5 per cent.

Goods producing industries fell 0.2 per cent in the June quarter, driven by declines in manufacturing and construction.

"Both of these industries rose in the March 2019 quarter," Dunnet said.

The size of New Zealand's economy in annual current price terms hit a milestone in the June 2019 quarter, reaching $300 billion for the first time.

"It took about fourteen years for the economy to go from $100b to $200b, and nine years to reach $300b," Dunnet said.

Earlier this morning, the US Federal Reserve cut its benchmark interest rate for a second time this year, reflecting concerns about weaker business investment and exports.

The Fed's move will reduce its benchmark rate — which influences many consumer and business loans — by an additional quarter-point to a range of 1.75 per cent to 2 per cent.

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