GDP up 14 percent in the September quarter

New Zealand's gross domestic product (GDP) rose 14 percent in the September quarter, bouncing back from the June quarter's historic 12.2 percent fall.

The resurgence was widely predicted, with most of the country free of coronavirus restrictions in July, August and September; but impacted by the August outbreak in Auckland. 

"This resulted in the strongest quarterly growth in GDP on record in New Zealand, as the economy bounced back from the lockdown earlier in the year when non-essential businesses closed," said Statistics NZ national accounts senior manager Paul Pascoe. 

"GDP was up compared with the September 2019 quarter, indicating that overall we've managed to return to a pre-COVID level of activity. However, the effects of COVID-19 have had specific and varied impacts at industry level and, for some industries, these may persist for some time." 

While the quarterly rise was a record, it's come after two consecutive quarters where it fell - resulting in a year-to-date GDP decline of 2.2 percent, the biggest on record.

But compared to our peers, New Zealand is doing well. Australia, the UK, Canada and the US all had boosts in their September quarter data, but New Zealand is only one of the five to wipe out the previous quarter's losses.

Construction led the way, up a whopping 52.4 percent, followed by retail trade and accommodation, up 42.8 percent. 

"Retail sales values recorded the largest September 2020 quarter rise since the series began in 1995, as people spent more on household goods, cars, and food, while residential building was at the highest-ever levels by volume," said Pascoe.

"The retail trade and accommodation, and construction, industries were both significantly affected by the alert level 4 restrictions in the previous quarter. Accommodation, restaurants, and bars have also been affected by New Zealand’s border being closed to international travellers since mid-March. This sub-industry is down 11.8 percent through the year to September 2020."

Annually transport, postal and warehousing is down 20 percent, though up 16 percent on the June quarter. Service industries rose 11.1 percent, and goods-producing industries 26 percent. 

Finance Minister Grant Robertson has in the past said the best economic response to COVID-19 was a health one, saying the strict lockdown in March and April would benefit the economy in the long-run.

'With a vengeance'

Kiwibank said the economy had bounced back "with a vengeance", calling it "as close as you get to a true V-shaped recovery".

"Our economy is tracking nicely, all things considered," said chief economist Jarrod Kerr. "GDP fell 2.2 percent over the year to September. Sure, that's the largest annual decline ever recorded. But we'd take that with a smile. Especially when you consider the 5-7 percent declines originally forecast.

"It's clear that 95 percent of our economy is performing particularly well. But we must spare a thought for the other 5 percent. The true test of the tourism and education sectors is right now, over the peak summer season. And there's a risk we see activity decline over the 4Q, and/or 1Q 2021. 

"The Australian travel bubble will help, if implemented soon. But there's billions of international tourist dollars not flowing through our economy over summer."