New Zealand's Economy Expanded 0.2% in Fourth Quarter, Avoiding Recession
New Zealand’s economy expanded more than economists forecast in the fourth quarter as stronger exports and construction helped the nation avoid a recession before a Feb. 22 earthquake that may have stalled growth.
Gross domestic product rose 0.2 percent in the three months ended Dec. 31 from the previous quarter when it contracted 0.2 percent, Statistics New Zealand said in a report released in Wellington today. The median forecast of 14 economists surveyed by Bloomberg News was 0.1 percent growth. From a year earlier, the economy grew 0.8 percent.
A sluggish economy and last month’s magnitude 6.3 temblor, which killed more than 160 people and wrecked buildings in the city of Christchurch, prompted central bank Governor Alan Bollard to cut interest rates on March 10 to a record low 2.5 percent. New Zealand’s dollar, the worst performing G-10 currency so far this year, gained after the report.
“The pace of growth was very underwhelming with the economy essentially tracking sideways,” said Jane Turner, an economist at ASB Bank Ltd. This month’s rate cut “should help bring some relief to stretched households and businesses. We expect a recovery in confidence and demand over the second half of 2011.”
New Zealand’s dollar bought 74.26 U.S. cents as of 11:40 a.m. in Wellington from 74.00 cents before the data. It has slumped 4.8 percent this year.
Annual average growth, a measure forecast by the central bank, was 1.5 percent, today’s report showed. Bollard on March 10 estimated a 1.4 percent pace. He expects 1.3 percent growth in 2011 and 5.4 percent a year later.
“There are reasons to be optimistic about growth picking up later this year,” Finance Minister Bill English said in an e-mailed statement, citing high prices for exports, low interest rates, reconstruction of Christchurch and visitor spending when the nation hosts the Rugby World Cup in September.
In the fourth quarter, the production-based measure of GDP was bolstered by forestry, manufacturing and commercial building, today’s report showed. Exports and investment also increased.
Manufacturing expanded 2.5 percent, led by metal products, machinery, food and beverages. Commercial building rose, offsetting a slump in home construction. Forestry expanded at the fastest pace in 11 years, reflecting international demand for lumber, the statistics agency said.
Exports, which make up 30 percent of the economy, increased 2.1 percent, led by milk, meat and lumber shipments, the report showed. Investment increased 4.8 percent.
Imports rose 6.6 percent, the most since the first quarter of 2004, led by purchases of aircraft and tourist spending abroad. The surge helped stoke the biggest buildup in inventories since 1987.
Household consumption rose 0.2 percent, led by demand for services including recreation and education. Spending on furniture, appliances and other durable goods fell 1.2 percent. Demand for non-durable products such as fuel also dropped.
Growth was hindered by a slowdown in farm output as a drought curbed milk production, the statistics agency said. Wholesale trade fell for the first time in five quarters while the retail, accommodation and restaurant industry had its largest decline in almost two years.
Hallenstein Glasson Holdings Ltd. (HLG), an Auckland-based clothing retailer, today said net income fell 17 percent in the six months ended Feb. 1 from a year earlier, reflecting weaker sales in some categories during the Christmas and summer vacation period.
“The general economic environment can best be described as challenging,” the company said in a statement sent to the stock exchange. “The rising cost of food and petrol has an immediate impact on our customers.”
Ten of 14 economists surveyed on March 10 by Bloomberg News expect Bollard will keep the rates unchanged until next year. Four predict a move higher in the fourth quarter.
The economy shrank in the third quarter for the first time since the first quarter of 2009, which was the end of five straight quarterly contractions as the global credit crisis contributed to the nation’s worst recession in three decades.
Growth returned through the middle of 2009, supported by a housing recovery and demand for the nation’s commodity exports from China and Asia. Still, the pace of expansion slowed as consumers and companies preferred to reduce debt rather than spend or invest.
Last month’s earthquake followed a magnitude 7 temblor that rocked the South Island city of Christchurch and surrounding districts on Sept. 4, wrecking homes but claiming no lives.
The Reserve Bank of New Zealand has estimated the cost of the rebuilding from the two events will be at least NZ$15 billion ($11 billion) commencing in 2012. It forecasts a contraction in GDP in the first quarter.
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