GDP up 2.8 percent, tipped to drop in the third quarter

Gross domestic product rose 2.8 percent in the June 2021 quarter.
Gross domestic product rose 2.8 percent in the June 2021 quarter. Photo credit: GettyImages.

New Zealand gross domestic product (GDP) grew by 2.8 percent over the June 2021 quarter.

Statistics New Zealand on Thursday confirmed GDP, a measure of growth in national outputs, rose 2.8 percent over the June quarter, (seasonally-adjusted) compared to the March quarter.

But following the move to COVID-19 alert level 4 on August 18, ANZ and Infometrics economists forecast a 6 to 7 percent GDP fall in the September 2021 quarter.

The June result follows a 1.4 percent rise in the March 2021 quarter (revised from 1.6 percent), capturing 10 days of the level 3 lockdown in Auckland. 

It marks the second successive quarterly rise in GDP, after a 1 percent fall in the December 2020 quarter.

June quarter GDP was 4.3 percent higher than the December 2019 quarter, before COVID-19 restrictions started, Stats NZ said.  

Service industries led GDP growth in the June quarter - retail trade and accommodation were the largest contributor, Stats NZ said.  This was driven by higher activity in accommodation and food services.

Higher activity in engineering, architectural and consulting services resulted in a 4.8 percent rise in business services.

Service exports rose 63 percent. Travel and transport services increased, along with other business services, such as film exports.  

Rises in air transport and transport support helped the transport, postal and warehousing industry.  But overall figures showed a 7 percent fall in activity since the December 2019 quarter.

"The June 2021 quarter experienced fewer COVID-19 restrictions than previous quarters affected by COVID-19. Many industries experienced activity at or above pre-COVID-19 levels, while some remained below," Stats NZ national accounts senior manager Paul Pascoe said.

The June GDP data captures six days of COVID-19 alert level 2 for Wellington, at the end of June.

The June quarter traditionally showed a decrease in international travel activity, Stats NZ said.  But COVID-19 has changed typical patterns of activity.  

International travel expenditure didn't show a normal decline from March. This had the effect of muting GDP growth in March and adding to GDP growth in June.

"Opening the trans-Tasman travel bubble with Australia in the June 2021 quarter also contributed to services industries with links to tourism, such as retail and accommodation, and transport," Pascoe added.

Household spending increased 6 percent compared to the December 2019 quarter (before the COVID-19 pandemic), Statistics New Zealand said. 

Household consumption fell 1.4 percent. This was due to a 1.9 percent drop in service spending.  

In the year to June 2021, the size of the economy (expressed in current prices), grew to $340 billion.

Ahead of the official June quarter result, ANZ senior economist Miles Workman confirmed the bank's forecast was for a 1.2 percent gain.

Infometrics principal economist Brad Olsen estimated a 1.5 percent quarterly GDP gain, reflecting a stronger level of activity across a number of industries.

"In the June quarter, there were quite strong results coming through in the arts and recreation sector...retail trade spending numbers were still going gangbusters, higher construction activity [and] improved manufacturing," Olsen said.

Referring to the June quarter GDP result as "very strong", Olsen said the level of growth is surprising.

But it reinforces that the economy was still expanding, the June figure showing a "very firm result" for the New Zealand economy.

"That gives us confidence that the economy was well-positioned heading into lockdown, and also means we expect that bounce-back to occur," Olsen said.

GDP tipped to drop in September 2021 quarter

Looking ahead, in the third quarter (July to September 2021), ANZ is forecasting a 6 percent GDP fall. Infometrics is forecasting a slightly bigger fall, of 6.9 percent.

ANZ senior economist Miles Workman said it's forecast is based on three weeks of level 4 lockdown.  Regional splits in alert levels, and the full duration of Auckland's lockdown, could not yet be measured.

But their forecasts of a September GDP fall are smaller than the record 12.2 percent drop (since revised to 11 percent), in the June 2020 quarter.