NZ economy growth exceeds forecast

  • 17/03/2016
NZ economy growth exceeds forecast

New Zealand's economy grew at a faster pace than expected in the final three months of 2015 on increased activity in business services, a boost in retail and accommodation spending and renewed construction activity.

Gross domestic product (GDP) expanded 0.9 percent in the three months ended December 31, the same pace as the September quarter, Statistics New Zealand said.

That was more than the 0.6 percent projected in a Reuters poll of economists and the Reserve Bank's forecast of 0.7 percent.

GDP grew 2.3 percent from the same quarter a year earlier, also ahead of forecast, and expanded at a 2.5 percent rate on an annual average basis.

Service industries, which account for about 70 percent of GDP, underpinned the expansion, with retail trade and accommodation up 1.7 percent, financial and insurance services expanding 1.2 percent, and professional, scientific, technical, administration and support increasing 1.5 percent.

"The increase in business services was driven by increased advertising, market research and management services, as well as scientific, architectural and engineering services," Statistics NZ said.

The New Zealand dollar rose to 67.72 US cents after the figures were released, from 67.38 cents immediately before.

The primary sector contracted 1.4 percent in the quarter, following a 0.4 percent decline in September, with agriculture, forestry and fishing shrinking 1.6 percent in the three month period due to lower sheep and beef production. On an annual basis, agriculture, forestry and fishing activity increased 0.1 percent.

Record inbound net migration has been underpinning New Zealand's economy in the past year. The swelling population has meant increased economic activity hasn't driven up prices as much as the Reserve Bank would have estimated.

Governor Graeme Wheeler last week cut the official cash rate a quarter point to a record low 2.25 percent to try to lift inflation back within his target band of between 1-and-3 percent.

Construction activity on the production measure expanded 2.5 percent in the quarter and was up 2.4 percent from the same quarter a year earlier.

Tourism has been supporting the economy as a weak Kiwi dollar and cheap oil lures foreign visitors.