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Gross Domestic Product: December 2012 quarter
Embargoed until 10:45am  –  21 March 2013
Commentary

New Zealand economy grows 1.5 percent

Gross domestic product (GDP) was up 1.5 percent in the December 2012 quarter, following an increase of 0.2 percent in the September 2012 quarter.

The latest growth was broad-based, with 15 of the 16 industries recording increases.

The main movements by industry were:

  • Agriculture, forestry, and fishing (up 2.6 percent), mainly driven by forestry and logging activity.
  • Retail trade and accommodation (up 2.3 percent), driven by the largest increase in retail activity (up 2.5 percent) since the March 2007 quarter.
  • Wholesale trade (up 2.1 percent), mainly due to machinery and equipment wholesaling.
  • Construction (up 1.8 percent), due to a rise in heavy and civil engineering construction. This is the fifth quarterly rise in a row for construction.

Graph, Gross domestic product by industry, change from previous quarter, December 2012 quarter.

Economic activity for the year ended December 2012 was up 2.5 percent when compared with the December 2011 year.

Graph, Gross domestic product, annual change, December 2006 to December 2012.

Activity in the December 2012 quarter was 3.0 percent higher than in the December 2011 quarter.

Expenditure on GDP – main movements

The expenditure measure of GDP rose 1.4 percent in the December 2012 quarter. The expenditure and production measure of GDP are conceptually the same. The production measure of GDP measures the volume of goods and services produced in the economy, while the expenditure measure shows how those goods and services were used.

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

  • household consumption expenditure (up 1.6 percent), due to increased spending on durable goods such as audio-visual equipment, furniture and appliances, and used vehicles
  • gross fixed capital formation (up 2.2 percent), with investment in plant, machinery, and equipment the largest contributor
  • inventories were run down $131 million, with a run down in manufacturing stocks
  • exports of goods and services (up 0.9 percent), with exports of forestry products up
  • imports of goods and services (down 2.0 percent), led by a decrease in capital goods.

Graph, Gross domestic expenditure by component, change from previous quarter, December 2012 quarter.

Expenditure on GDP for the December 2012 year rose 3.0 percent when compared with the December 2011 year.

Primary industries up

Activity in the primary industries increased 3.2 percent in the December 2012 quarter. The largest contributor was a 2.6 percent increase in agriculture, forestry, and fishing activity, with forestry and logging production up 9.0 percent. Agriculture, forestry, and fishing is now at its highest level since the series began in June 1987.

Graph, Agriculture, forestry, and fishing, quarterly change, December 2006 to December 2012.

Strong increase in forestry and logging, agriculture and mining also up

Forestry and logging production grew 9.0 percent in the December 2012 quarter, the largest increase since September 1999. Forestry and logging activity is now at its highest level since the series began in June 1987. Exports of forestry primary products also rose as measured by the expenditure measure of GDP.

Agriculture activity increased 1.5 percent. This increase was due to increased poultry, deer, and other livestock farming. Partly offsetting this was a fall in dairy production, which is reflected in a decrease in dairy products exported.

Mining production also increased, up 5.6 percent, after a 6.8 percent fall in the September 2012 quarter. The latest increase was driven by exploration activity.

Potential impact of the 2013 drought 

The dry weather that New Zealand is currently experiencing is likely to impact on GDP during the 2013 year.

In GDP, the quarterly indicators for agriculture are outputs such as milk production and slaughter numbers. These numbers are reconciled to annual benchmarks as more comprehensive data becomes available. In the current quarterly method, there are no indicators for intermediate consumption (the goods and services used during production) so intermediate consumption is usually updated annually.

During periods of drought, the value added of agriculture can be affected by changes to both output and intermediate consumption. Output is boosted as animals are sent for slaughter, and declines as production (such as milk production) falls. Output impacts do not always show up during the quarter when dry weather is experienced because the effects can last several quarters. A drought can affect future production, through reduced herds or conception rates. Intermediate consumption can go up as farmers purchase feed to replace grass or move stock to other areas. We will supplement existing quarterly indicators with other available data to measure the impact of the drought, but the full impact will not show up until the more comprehensive annual data is incorporated.

Primary industries still strong for the year

For the December 2012 year, growth in the primary industries was up 9.4 percent when compared with the December 2011 year. The latest rise was due to a 14.8 percent annual increase in agriculture, reflecting favourable growing conditions in the first half of the year.

Goods-producing industries up due to construction

Goods producing industries increased 0.6 percent in the December 2012 quarter. The main driver was a 1.8 percent rise in construction activity. Also up was electricity, gas, water, and waste production, up 2.2 percent. Partly offsetting these rises was a 0.5 percent fall in manufacturing activity.

Construction activity continues to grow

Construction activity increased 1.8 percent. Construction activity grew in the previous five quarters, but is still 2.9 percent below its peak in the June 2010 quarter. The latest rise was driven by heavy and civil engineering construction activity, which includes roads and power plants. Construction services, which includes plumbing and electrical services, also increased. The increase in heavy and civil engineering activity is consistent with the rise in investment as measured in gross fixed capital formation. All other areas of construction had small increases.

Graph, Construction, quarterly change, December 2006 to December 2012.

Electricity, gas, water, and waste services increased 2.2 percent. This follows a 3.4 percent rise in the September 2012 quarter. The latest rise was driven by electricity generation and on-selling, due to an increase in wind generation.

Graph, Electricity, gas, water, and waste services, quarterly change, December 2006 to December 2012.

Manufacturing down

Manufacturing activity decreased 0.5 percent, after a 0.6 percent fall in the September 2012 quarter. The latest decrease was due to an 8.7 percent fall in petroleum, chemical, plastic, and rubber products manufacturing.

Graph, Manufacturing, quarterly change, December 2006 to December 2012.

The Economic Survey of Manufacturing: December 2012 quarter reported a rise in the volume of petroleum, chemical, plastic, and rubber sales. The ESM measures deflated sales, while GDP measures production, including inventories. Differences can occur during the period after something is produced and before it is sold. Different data sources are also used. In GDP, direct volume measures – such as tonnes of oil and gas produced – are used to estimate petroleum, chemical, plastic, and rubber production.

Goods-producing industries up for the year

For the December 2012 year, activity in the goods-producing industries was up 1.8 percent compared with the previous year. Construction activity, up 6.1 percent, was the main contributor to the annual increase. This is the largest annual increase in construction activity since a 9.2 percent rise in the March 2008 year. Even though manufacturing activity was down in the December 2012 quarter, activity was up 1.3 percent in the December 2012 year compared with the December 2011 year.

All services industries up 

In the December 2012 quarter, activity in the service industries rose 1.1 percent, the biggest increase since a 1.5 percent rise in the December 2006 quarter. All service industries were up in the latest quarter. Retail trade and accommodation activity was the largest contributor, up 2.3 percent.

Retail has largest increase since March 2007

Activity in retail trade and accommodation increased 2.3 percent in the December 2012 quarter, driven by a 2.5 percent increase in retail trade. This is the largest increase in retail trade since the March 2007 quarter, which is now at its highest level since the series began in June 1987. The increase in retail trade was due to furniture, electrical, and hardware, also reflected in household consumption expenditure. Accommodation and restaurants also rose, up 1.7 percent.

Graph, Retail trade and accommodation, quarterly change, December 2006 to December 2012.

Wholesale activity increased 2.1 percent in the December 2012 quarter. This increase follows two consecutive quarterly decreases. The latest rise was due to an increase in machinery and equipment wholesaling. Investment in this area also increased as measured in gross fixed capital formation.

Graph, Wholesale trade, quarterly change, December 2006 to December 2012.

Other service industries

Rental, hiring, and real estate services increased 0.7 percent in the December 2012 quarter, driven by a rise in real estate services. Activity in rental, hiring and real estate services is now at its highest since the series began in June 1987.

Transport, postal and warehousing increased 1.4 percent mainly due to a rise in road transport.

Finance and insurance services also rose, up 1.2 percent. This increase was due to a rise in banking and finance activity.

Arts, recreation, and other services increased 2.9 percent, the largest increase in this industry since the March 1999 quarter. Repair and maintenance services was the largest contributor.

Health care and social assistance services was up 1.4 percent, due to increases in both private and public sector health care.

Public administration and safety rose 1.2 percent. This industry includes central and local government, and police and fire services. The biggest contributor to the latest rise was central government administration, defence, and public safety.

Activity in service industries up for the year

For the December 2012 year, activity in the service industries increased 1.8 percent. The main contributor was a 3.8 percent increase in professional, scientific, technical, administration, and support services. 

Expenditure on GDP up 1.4 percent

Expenditure on GDP increased 1.4 percent in the December 2012 quarter, after a revised increase of 0.5 percent in the September 2012 quarter. The latest rise is the highest since the June 2007 quarter.

For the December 2012 year, expenditure on GDP increased 3.0 percent compared with the December 2011 year.

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 expenditure-based measure uses a different range of data sources and is more susceptible to timing and valuation changes in the short-term.

Strong increase in household consumption expenditure

Household final consumption expenditure was up in the December 2012 quarter (1.6 percent), the largest increase since the December 2006 quarter. Within household consumption expenditure, spending on durable goods, non-durable goods, and services were all up. Household consumption expenditure measures the volume of spending on goods and services by New Zealand-resident households.

Graph, Household consumption expenditure, quarterly change, December 2006 to December 2012.

The volume of durable goods purchased by New Zealand households increased 3.2 percent in the December 2012 quarter, after a rise of 0.1 percent in the September 2012 quarter. Spending on audio-visual equipment, furniture and appliances, and used vehicles was up, and is reflected in a 2.5 percent increase in retail trade activity as measured in the production measure of GDP.

The volume of household expenditure on services increased 1.6 percent in the December 2012 quarter, after a 0.5 percent increase in the September 2012 quarter. The latest rise is the highest since the March 2008 quarter. Spending on air transport services, and vehicle servicing and repairs was up.

Household consumption of non-durable goods increased by 0.6 percent in the December 2012 quarter, after a 0.7 percent decrease in the September 2012 quarter. Spending on food and non-alcoholic beverages, and petrol was up this quarter.

The total volume of spending in New Zealand was up 0.9 percent, after an increase of 0.3 percent in the September 2012 quarter. Spending by New Zealand residents overseas increased 1.2 percent during the December 2012 quarter, while spending by overseas visitors in New Zealand declined 4.5 percent.

Household expenditure up 2.3 percent for the year

For the December 2012 year, the volume of household consumption expenditure increased 2.3 percent, compared with the previous year. The latest rise was due to increased spending on durables (up 6.1 percent), non-durables (up 1.1 percent), and services (up 1.7 percent).

Investment in fixed assets up

Gross fixed capital formation (GFKF) increased 2.2 percent in the December 2012 quarter, following a decrease of 2.1 percent in the September 2012 quarter. GFKF consists of business investment plus residential building investment.

Graph, Gross fixed capital formation, quarterly change, December 2006 to December 2012.

Investment in residential building increased 2.0 percent in the December 2012 quarter, following a 5.5 percent increase in the September 2012 quarter. The Value of Building Work Put in Place: December 2012 quarter reported a 0.7 percent increase in residential building activity. Residential building activity for Canterbury rose 1.7 percent in the December 2012 quarter. In GDP, investment in residential buildings includes the value of work put in place and transfer costs, which are the costs incurred when the ownership of land, buildings, and other structures is transferred.

Graph, Gross fixed capital formation – residential building, quarterly change, December 2006 to December 2012.

For the year ended December 2012, residential building investment increased 10.9 percent.

Business investment increases

Business investment in fixed assets, which is total GFKF excluding residential building, increased 2.2 percent in the December 2012 quarter, after a decrease of 4.1 percent in the September 2012 quarter. The main driver of the increase was investment in plant, machinery, and equipment (up 7.6 percent), following a 16.4 percent decrease in the September 2012 quarter. This increase is reflected in imports of machinery and plant this quarter.

Graph, Gross fixed capital formation – plant, machinery, and equipment, quarterly change, December 2006 to December 2012.

Other contributors to this quarter’s increase were investment in:

  • other construction (up 9.6 percent)
  • intangible fixed assets (up 4.5 percent)
  • non-residential building (up 2.0 percent)
  • transport equipment (up 1.1 percent).

The increase in other construction is consistent with an increase in heavy and civil construction activity in the production measure of GDP. Heavy and civil construction includes infrastructure such as roads and power plants.

Investment in fixed assets up for the year

For the year ended December 2012, GFKF increased 6.6 percent and business investment increased 5.4 percent, compared with the year ended December 2011.

Run-down in inventories

In the December 2012 quarter, the demand for goods produced exceeded supply leading to a $131 million run-down, following a revised build-up of $389 million in the September 2012 quarter. The run-down this quarter was driven by a decrease in manufacturing and agriculture inventories.

Government final consumption expenditure down

General government final consumption expenditure decreased 0.7 percent in the December 2012 quarter, following a 0.1 percent increase in the September 2012 quarter. Central government expenditure was down 0.8 percent due to decreased purchases. Local government was down 0.2 percent in the latest quarter.

Graph, General government expenditure, quarterly change, December 2006 to December 2012.

Annual general government expenditure up

For the December 2012 year, general government final consumption expenditure increased 0.3 percent.

Net exports increase

Export of goods up due to forestry and logging products

Export volumes of goods and services increased 0.9 percent in the December 2012 quarter, following a 4.2 percent increase in the September 2012 quarter.

The volume of goods exported increased 2.1 percent, following a 6.1 percent increase in the September 2012 quarter. The main drivers of the latest increase were:

  • forestry primary products (up 24.2 percent)
  • metal products, machinery, and equipment (up 4.2 percent)
  • chemical, rubber, plastic and other non-metallic products (up 7.9 percent).

Forestry and logging production also rose as measured in the production measure of GDP. Partly offsetting the increase this quarter was a decrease in dairy products (down 12.1 percent).

Exports of services decreased 4.8 percent, following a 1.6 percent fall in the September 2012 quarter. The latest decrease was driven by exports of travel services (down 4.2 percent).

Graph, Imports and exports of goods and services, quarterly, December 2006 to December 2012.

Import of goods down due to capital goods

Import volumes of goods and services decreased 2.0 percent in the December 2012 quarter, following a 2.1 percent increase in the September 2012 quarter.

The volume of goods imported decreased 3.1 percent, following a 2.6 percent increase in the September 2012 quarter. The main contributor to this decrease was capital goods imported (down 9.0 percent), driven by industrial transport equipment (down 5.3 percent). Partly offsetting this decrease was an increase in imports of plant, machinery, and equipment (up 2.4 percent).

Imports of services was up 0.7 percent, following a 0.4 percent increase in the September 2012 quarter. 

Export and import volumes both up for the year

For the December 2012 year, export volumes increased 2.1 percent, mainly due to dairy products (up 14.2 percent). Over the same period, import volumes increased 1.4 percent, mainly driven by imports of plant, machinery, and equipment (up 14.2 percent).

Implicit price deflators

The GDP implicit price deflator (IPD) for the December 2012 year decreased 0.6 percent. The GDP IPD is a broad measure of the overall price change for final goods and services produced in New Zealand.

The IPD for gross national expenditure increased 1.1 percent for the year ended December 2012. This provides a broad measure of the overall price change for final goods and services purchased in New Zealand (such as consumer and investment goods).

The consumers price index (CPI) increased 0.9 percent for the year ended December 2012 (see Consumers Price Index: December 2012 quarter). The CPI measures the rate of price change of goods and services purchased by households.

Real gross national disposable income up 1.0 percent for the year

Real gross national disposable income increased 1.0 percent for the December 2012 year. While GDP is a measure of domestic production or economic activity over a given time period, RGNDI can be viewed as a broad welfare indicator. For more information about RGNDI see the definitions section.

The merchandise terms of trade has fallen for six consecutive quarters (see Overseas Trade Indexes (Prices): December 2012 quarter (provisional)). This fall resulted in lower RGNDI growth compared with GDP growth for the December 2012 year. As the terms of trade falls, our purchasing power of imports from overseas relative to exports falls.

Graph, Gross domestic product and real gross national disposable income, annual change, December 2006 to December 2012.

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

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