New Zealand Economy Expands Faster Than Forecast; Kiwi Jumpsby
First-quarter growth boosted by construction, health services
Annual growth accelerates even as quarterly expansion slows
New Zealand’s economic growth was stronger than economists forecast last quarter as construction boomed and a rising population increased demand for health-care services. The local dollar surged.
Gross domestic product grew 0.7 percent in the first quarter from the final three months of 2015, when it rose 0.9 percent, Statistics New Zealand said in Wellington Thursday. The expansion exceeded the 0.5 percent median forecast of 15 economists surveyed by Bloomberg. Annual GDP growth accelerated to 2.8 percent from 2.3 percent.
The Reserve Bank, which predicted a 0.6 percent expansion for the first quarter, expects growth to accelerate this year, bolstered by surging immigration, housing demand and record-low interest rates. Still, Governor Graeme Wheeler said June 9 that the official cash rate may need to fall further as local inflation remains benign.
Thursday’s data “at the margin should reduce the odds of an August rate cut,” said Philip Borkin, a senior economist at ANZ Bank in Auckland. “The odds still favor an August cut, but it is not a conviction view.”
New Zealand’s dollar jumped as much as half a U.S. cent. It bought 70.72 cents at 11:21 a.m. in Wellington from 70.41 cents immediately before the report.
Annual growth beat economists’ forecast for a 2.6 percent gain. The RBNZ last week projected growth will quicken to 3.4 percent by March 2017.
First-quarter growth was led by a 1.5 percent gain in goods-producing sectors as construction more than offset a drop in manufacturing. Services industries, which make up 70 percent of GDP, rose 0.8 percent, led by health-care and the impact of tourists on retailing and accommodation.
- Construction increased 4.9 percent, the biggest gain since the first quarter of 2014
- Health-care rose the most in 11 years on demand from a rising population
- Nine of 11 services industries expanded
- Food manufacturing fell 1.3 percent amid lower meat processing
- Five of 9 manufacturing industries contracted
- Farm output was little changed as falling sheep and beef production was offset by higher dairy output
Measured by spending, rather than output, GDP grew 0.5 percent from the fourth quarter and 3.1 percent from a year earlier, the statistics agency said.
- Household spending was led higher by demand for services
- Investment in building and infrastructure such as roads and telecommunications networks more than offset reduced spending on transport equipment
- Exports of goods fell, led by dairy and meat, more than offsetting increased tourist spending
- Imports of goods were little changed while imports of services increased