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Gross Domestic Product: March 2017 quarter
Embargoed until 10:45am  –  15 June 2017
Commentary

New Zealand economy grows 0.5 percent

Gross domestic product (GDP) was up 0.5 percent in the March 2017 quarter. This follows a 0.4 percent increase in the December 2016 quarter.

Growth for the year ended March 2017 was 3.0 percent, down from 3.1 percent for the year ended December 2016.

Graph, gross domestic product, quarterly and annual change, March 2011 to March 2017.

Eleven of 16 industries increased this quarter.

The main increases by industry were:

  • Agriculture was up 4.3 percent.
  • Retail trade and accommodation was up 1.8 percent.
  • Manufacturing was up 1.0 percent.
  • Health care and residential care was up 1.6 percent.

The main decreases by industry were:

  • Construction was down 2.1 percent.
  • Transport, postal, and warehousing was down 2.0 percent.
  • Arts, recreation, and other services was down 0.8 percent.

GDP per capita falls over quarter, up over the year

When comparing GDP growth to population change, GDP per capita was down 0.1 percent in the March 2017 quarter. This follows a 0.2 percent fall in the December 2016 quarter.

GDP per capita for the year ended March 2017 increased 0.9 percent.

Expenditure on GDP up 0.2 percent

The expenditure method of GDP rose 0.2 percent in the March 2017 quarter, following a revised 0.1 percent increase in the December 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:

  • Net exports was a negative contribution to GDP with both exports of goods and services down 0.4 percent, and imports of goods and services up 1.3 percent.
  • Household consumption expenditure increased 1.3 percent, with expenditure on durables up 2.5 percent.
  • Investment in fixed assets was up 1.2 percent, due to an increase in plant, machinery, and equipment investment. This was partly offset by falls in transport equipment; non-residential building; residential building; and other construction investment.
  • Inventories were built-up $338 million due to an increase in distribution inventories. However, as this was a smaller build-up than that in the previous quarter the change in inventories had a negative contribution to overall GDP growth.

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

Agriculture recovery underpins growth

Primary industries rose 2.2 percent in the March 2017 quarter, following a 1.0 percent decline in the December 2016 quarter. Agriculture was the biggest contributor to the growth (up 4.3 percent) as a result of increased milk production, following two consecutive quarters of fall.

Dairy product manufacturing was a key contributor to the increase in food, beverage, and tobacco manufacturing.

Dairy export volumes continued to fall substantially, down 11 percent following a 7.8 percent decline in the December 2016 quarter. The latest fall, combined with higher dairy manufacturing, led to a build-up in dairy product inventories.

Forestry and logging declined 3.2 percent, following a 6.9 percent (revised) decline in the December 2016 quarter. Exports of forestry primary products were down 21 percent.

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

Construction activity and investment fall

Construction activity fell considerably (down 2.1 percent) with all construction sub-components down this quarter. This follows a 1.4 percent increase for the December 2016 quarter. The fall in the latest quarter follows strong increases in 2016, so annual construction was up 9.3 percent for the year ended March 2017.

Construction-related investment was also down, with declines in residential building (down 1.6 percent), non-residential building (down 7.9 percent), and other construction (down 3.1 percent). The fall in construction investment aligns closely with the decline in construction activity reported in Value of Building Work Put in Place: March 2017 quarter.

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

Business investment up on growth in plant, machinery and equipment

Overall investment in fixed assets was up 1.2 percent in the March 2017 quarter.  A fall in construction-related investment was more than offset by a 13 percent increase in plant, machinery and equipment (PME) investment – the highest quarterly growth in PME since September 2010.

The increase in PME was the main contributor to business investment growth of 2.3 percent. This was reflected in an increase in machinery imports (up 4.9 percent) and a 6.9 percent increase in transport equipment, machinery and equipment manufacturing.  The increase in transport equipment, machinery and equipment manufacturing drove the 1.0 percent growth in overall manufacturing.

Government investment was down 4.7 percent mostly due to lower imports of air transport equipment, which are heavily influenced by the timing of large aircraft acquisitions.

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

Smaller growth in service industries

Service industries rose 0.4 percent in the March 2017 quarter, down from a 0.8 percent (revised) growth in the previous quarter. Eight of the 11 service industries had increased activity.

The growth in services was led by a strong 1.8 percent increase in retail trade and accommodation. Wholesale trade (up 1.4 percent), health care and residential care (up 1.6 percent), and public administration, safety, and defence (up 1.6 percent) also increased strongly.

Business services was a mixed bag with a relatively flat increase of 0.1 percent, following a 1.8 percent (revised) increase in the December 2016 quarter. Overall, business services was up 4.7 percent for the year ended March 2017.

The largest decline in the service industries was in transport, postal, and warehousing services (down 2.0 percent) after a 0.9 percent fall in the December 2016 quarter. All transport services components except for road transport were down in the latest quarter. Arts, recreation, and other services had the second largest fall (down 0.8 percent). Rental, hiring, and real estate services (the largest services industry) fell 0.1 percent as a result of fewer property sales.

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

Rise in domestic consumption, while tourist spending tapers off

Household consumption expenditure increased 1.3 percent in the March 2017 quarter. For the March 2017 year, household expenditure was up 4.7 percent, the highest annual movement since March 2006.

Services, non-durables, and durables all contributed to the growth in household expenditure this quarter. Household expenditure on services rose 0.9 percent which was comparable to the previous quarter. Durable goods spending rose 2.5 percent, driven by higher spending on used motor vehicles, audio-visual equipment, motorcycles, and clothing. Motor vehicles was the largest contributor to the 1.9 percent increase in retail trade, which was also reflected in a 10 percent increase in motor vehicle imports. Non-durables expenditure rose 0.4 percent in the March 2017 quarter, led by higher expenditure on alcohol, electricity, and petrol.

New Zealand household expenditure overseas was up 3.4 percent as more households travelled abroad, contributing to the overall growth in household consumption. Tourist consumption expenditure dropped 1.7 percent as visitor arrivals slowed for the quarter.

Graph, household consumption expenditure, quarterly and annual growth, March 2011 to March 2017.

Real purchasing power of New Zealand's income down 0.3 percent

New Zealand’s ability to buy goods and services out of its income edged back over the quarter. Real gross national disposable income (RGNDI), which measures the real purchasing power of New Zealand’s disposable income, was down 0.3 percent in the March 2017 quarter. While this was the first quarterly fall since December 2014, RGNDI rose 3.9 percent for the March 2017 year. This compares to an increase in GDP of 3.0 percent over the same period.

GDP is a measure of economic activity, while RGNDI is a measure of the volumes of goods and services 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: March 2017 quarter.

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

While our terms of trade increased over the March 2017 quarter, reaching a 43-year high, this was more than offset by a fall in both net investment and transfer income with the rest of the world. This means RGNDI was negative this quarter in contrast to the positive growth in GDP. Overseas Trade Indexes (Prices and Volumes): March 2017 quarter (provisional) reported a 5.1 percent increase in the merchandise (goods) terms of trade, and a 0.1 percent increase in the services terms of trade. Both increases were caused by higher export prices, which more than offset higher 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 fewer exports are needed to pay for a given volume of imports. This means residents can purchase a larger volume of goods and services 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 down 0.9 percent in the March 2017 quarter, following a revised 1.8 percent increase in the December 2016 quarter. Over the March 2017 year, RGNDI per capita increased 1.8 percent. This shows that New Zealand’s real purchasing power increased more than New Zealand’s population over this period.

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

 0.5

 2.5

 Australia

 0.3

 1.7

 Canada

 0.9

 2.3

 Euro area (19 countries)

 0.6

 1.9

 Japan

 0.3

 1.3

 OECD

 0.4

 2.0

 United Kingdom

 0.2

 2.0

 United States

 0.3

 2.0

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.

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