New Zealand Economy Grows Faster Than Expected on Spending

  • Fourth-quarter GDP grows 0.9%, matching previous three months
  • Construction, retail and services growth offset farm decline

New Zealand’s economy expanded faster than economists expected last quarter as growth in construction, retail spending and business services more than offset lower farm production.

Gross domestic product grew 0.9 percent in the fourth quarter, matching the pace in the previous three months, Statistics New Zealand said in Wellington Thursday. The expansion was faster than the 0.7 percent median forecast of 17 economists surveyed by Bloomberg. GDP rose 2.3 percent from a year earlier.

Growth last year slowed from 4.1 percent in 2014, helping push inflation to a 16-year low of 0.1 percent and underscoring the Reserve Bank of New Zealand’s decision to cut interest rates last week. While the central bank expects the pace of economic expansion to pick up this year, Governor Graeme Wheeler said March 10 that the cash rate may need to fall further as the global outlook weakens and local inflation expectations sink.

“While today’s data was a touch stronger than anticipated, it doesn’t really alter our overall impression of the New Zealand economy,” said Dominick Stephens, chief economist at Westpac Banking Corp. in Auckland. “The split between goods and services is something we expect will continue into 2016.”

Currency Gains

New Zealand’s dollar surged as high as 67.81 U.S. cents immediately after the report and traded at 67.37 cents at 11:41 a.m. in Wellington.

Annual growth matched the pace in the third quarter, which was the weakest since late 2013. The RBNZ last week raised its forecast for annual growth through March 2016 to 2.6 percent from the 2.4 percent pace it projected three months earlier. It expects growth to accelerate to 3 percent by March 2017.

Fourth-quarter growth was led by services industries with increases recorded for retailing, accommodation and business services such as advertising and market research.

* Construction activity gained 2.5 percent
* Ten of 11 services industries expanded
* Nine of 11 retail industries expanded
* Manufacturing fell 0.4 percent led by food and beverages
* Farm output fell 1.7 percent on sheep, beef production while milk output was little changed

Measured by spending, rather than output, GDP grew 1.1 percent from the third quarter and 3.7 percent from a year earlier, the statistics agency said.

* Household spending gained the most since 3Q 2014 on purchases of services such as restaurants and airfares
* Investment in aircraft, computers and other plant and machinery fell, more than offsetting an increase in building investment

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