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Gross Domestic Product: December 2016 quarter
Embargoed until 10:45am  –  16 March 2017
Commentary

New Zealand economy grows 0.4 percent

Gross domestic product (GDP) was up 0.4 percent in the December 2016 quarter. This follows a revised 0.8 percent increase in the September 2016 quarter.

Growth for the year ended December 2016 was 3.1 percent, up from 2.9 percent for the year ended September 2016.

Graph, gross domestic product, quarterly and annual growth, December 2010 to December 2016 quarter.

 

Eight of 16 industries increased this quarter.

The largest increases by industry were:

  • business services was up 1.7 percent.
  • arts, recreation, and other services was up 3.8 percent.
  • construction was up 1.8 percent.
  • health care and residential care was up 1.3 percent.

The main decreases by industry were:

  • manufacturing was down 1.6 percent.
  • agriculture was down 0.6 percent.
  • mining was down 2.3 percent.

GDP per capita falls over quarter, up over the year

When comparing GDP growth to population change, GDP per capita was down 0.2 percent in the December 2016 quarter. This follows a revised 0.3 percent increase in the September 2016 quarter.

GDP per capita for the year ended December 2016 increased 0.9 percent.

Expenditure on GDP up 0.2 percent

The expenditure method of GDP rose 0.2 percent in the December 2016 quarter, following a revised 0.9 percent increase in the September 2016 quarter.

Note: The expenditure and production measures of GDP are conceptually the same, but use different data sources, so can differ in practice. The production measure of GDP measures the volume of goods and services produced in the economy, while the expenditure measure shows how these goods and services were used. While the production-based and expenditure-based measures are both official series, the production-based measure historically shows less volatility and is the preferred series for the quarter-on-quarter changes.

The main movements in the expenditure measure of GDP this quarter were:

  • exports of goods and services fell 3.8 percent, and imports of goods and services were up 1.9 percent
  • household consumption expenditure was up 0.4 percent, due to expenditure on services and durable goods
  • investment in fixed assets was up 0.7 percent, due to plant, machinery and equipment; intangible fixed assets; and non-residential building investment.
  • inventories were built-up $906 million following two quarters of big run-downs, the build-up this quarter was due to increases in manufacturing and distribution inventories.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Weaker primary sector weighs on growth

Primary industries fell 1.0 percent in the December 2016 quarter, following a 2.3 percent (revised) decline in the September 2016 quarter. Agriculture was down 0.6 percent as a result of lower than usual milk production for this time of year. The fall in milk production was one of the contributors to the fall in food, beverage, and tobacco manufacturing.

Dairy export volumes recorded a substantial fall, down 7.5 percent. 

Forestry and logging declined 5.1 percent, reversing some of the 7.2 percent (revised) gains in the September 2016 quarter. Exports of forestry and logging primary products were down 9.4 percent.

Mining activity fell 2.3 percent in the December 2016 quarter with both oil and gas extraction and coal mining production down. This was reflected in a 21 percent fall in exports of coal, crude petroleum and ores, minerals and gases. Lower extraction and production also saw a fall in other mining support services.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Mixed results for service industries

Service industries recorded an increase of 0.7 percent in the December 2016 quarter. Seven of the 11 service industries had increased activity, with the remainder showing only small falls.

The growth in services was led by a 1.7 percent increase in business services, particularly computer system design and related services, and advertising, market research and management services.

Arts, recreation, and other services (up 3.8 percent) and health care and residential care (up 1.3 percent) also showed strong activity.

The largest decline was in transport, postal, and warehousing services (down 0.7 percent). This industry reported a 3.7 percent rise in the September quarter, and was up 3.4 percent over the December 2016 year.

Graph, service industries breakdown, change from September 2016 quarter.

Construction activity still strong

Construction activity remained strong, rising 1.8 percent over the quarter, and is now up 10.5 percent for the December 2016 year. The annual rise in construction activity is the highest since the year to December 2004.

Construction-related investment was up. Investment in other construction, (including telecommunications infrastructure and roading) was up 3.1 percent. Investment in non-residential building was up 5.0 percent. Investment in residential building was flat this quarter, due to the transfer costs component (decreasing house sales). Residential building activity was up, reflected in the 1.1 percent increase in the volume of residential building activity in Value of Work Put in Place: December 2016 quarter.

Investment driven by capital goods imports

Overall investment in fixed assets was up 0.7 percent in the December 2016 quarter, following a revised 1.2 percent increase in the September 2016 quarter.

Plant, machinery and equipment was the main driver of investment growth this quarter (up 3.7 percent). This resulted from higher imports of capital goods.

Intangible assets also had increased investment, up 5.1 percent.

A decrease of 4.7 percent in transport equipment investment resulted from lower imports of air transport equipment.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices. 

Manufacturing falls

The largest contributor to the decrease in manufacturing was food, beverage, and tobacco manufacturing (down 4.0 percent).  The falls were widespread, including beverage and tobacco manufacturing; and fruit, oil, and cereal manufacturing. Transport equipment, machinery and equipment manufacturing was also down significantly (3.9 percent), reversing the growth of the September 2016 quarter.

Partly offsetting these falls were small increases in five of the nine manufacturing sub-industries, including metal product manufacturing (up 3.0 percent) and petroleum, chemical, plastic, and rubber product manufacturing (up 1.3 percent).

Graph, manufacturing by sub–industries, change from September 2016 quarter.

Record fall in goods exports this quarter

Exports of goods and services decreased 3.8 percent in the December 2016 quarter. This was due to a decrease of 6.0 percent in the exports of goods, the largest quarterly fall since 1992. This decrease was partly offset by an increase of 2.1 percent in exports of services. Dairy products (down 7.5 percent) and metal products, machinery and equipment (down 8.0 percent) showed the strongest falls. Decreases were also recorded for chemicals, rubber, plastic, and other non-metallic products (down 6.3 percent) and coal, crude petroleum and ores, minerals and gases (down 21 percent).

Graph, exports of goods and services by type, change from September 2016 quarter.

Imports up this quarter

Imports of goods and services were up 1.9 percent in the December 2016 quarter. This was due to increases in both imports of goods and imports of services, up 2.4 percent and 1.5 percent, respectively.

Imports of capital goods were up 4.1 percent this quarter, reflecting increased investment in plant, machinery and equipment. These increases, alongside an 8.3 percent increase in passenger motor vehicle imports, were the primary contributors to the growth in imports this quarter.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Smaller increase in domestic consumption, while tourist spending strong

Household consumption expenditure increased 0.4 percent in the December 2016 quarter, following two quarters of strong growth. For the December 2016 year, expenditure was up 4.3 percent, the highest annual movement since March 2006.

The main contributors to the growth this quarter were spending on services and durable goods. Household expenditure on services rose 0.9 percent, a slower rate of growth than in recent quarters. Most components of services expenditure increased. Durable goods spending rose 1.3 percent, due to spending on furniture and furnishings, motor vehicles, and audio-visual equipment. Non-durables expenditure declined 0.7 percent in the December 2016 quarter, with falls in many components led by petrol and grocery food.

Although household consumption expenditure increased, the overall growth of spending in New Zealand was boosted by strong overseas tourist spending, which was up 5.1 percent in the December 2016 quarter.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Real purchasing power of New Zealand's income up 2.8 percent

Real gross national disposable income (RGNDI), which measures the real purchasing power of New Zealand’s disposable income, was up 2.8 percent in the December 2016 quarter, the highest quarterly movement since March 2010. This follows a revised 0.9 percent increase in the September 2016 quarter. RGNDI increased 4.1 percent for the December 2016 year, compared with an increase in GDP of 3.1 percent over the same period. GDP is a measure of economic activity, while RGNDI is a measure of the volumes of goods and services that New Zealand residents have command over. RGNDI takes into account changes in the terms of trade effect (the price of imports relative to the price of exports), and real gains from net investment and transfer income with the rest of the world. The net investment draws upon Balance of Payments and International Investment Position: December 2016 quarter.

The terms of trade increased over the December 2016 quarter, resulting in higher growth in RGNDI compared with GDP. Overseas Trade Indexes (Prices and Volumes): December 2016 quarter (provisional) reported a 5.7 percent increase in the merchandise (goods) terms of trade, and a 2.5 percent increase in the services terms of trade. Both were caused by increases in export prices and decreases in import prices.

Terms of trade is the ratio of the price of exports to the price of imports. An increase in the terms of trade means that fewer exports are needed to pay for a given volume of imports. This means that a larger volume of goods and services can be purchased by residents out of the incomes generated by a given level of domestic production.

Note: Actual chain-volume series expressed in 2009/10 prices.

RGNDI per capita was up 2.3 percent in the December 2016 quarter, following a revised 0.4 percent increase in the September 2016 quarter. Over the December 2016 year, RGNDI per capita increased 2.0 percent. This shows that New Zealand’s real purchasing power increased more than New Zealand’s population over this period.

 

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

See Real gross national disposable income (in DataInfo+) for more about RGNDI.

International growth comparison – New Zealand compared with our trade partners

 Percentage changes in GDP – international comparisons
 Country

 Quarterly percentage change in GDP

 Change from same quarter previous year

 New Zealand

 0.4

 2.7

 Australia

 1.1

 2.4

 Canada

 0.6

 1.9

 Euro area (19 countries)

 0.4

 1.7

 Japan

 0.3

 1.6

 OECD

 0.4

 1.7

 United Kingdom

 0.7

 2.0

 United States

 0.5

 1.9

See OECD.Stat for GDP data covering other countries. Care should be taken when comparing New Zealand’s GDP figures with those of other countries, as the methodology used varies internationally.

Find data tables and more information

For more detailed data see the Excel tables in the 'Downloads' box.

See DataInfo+ for information on definitions and data quality. These sections were previously included in this release.

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