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Gross Domestic Product: June 2012 quarter
Embargoed until 10:45am  –  20 September 2012
Commentary

New Zealand economy grows 0.6 percent

Gross domestic product (GDP) was up 0.6 percent in the June 2012 quarter, following an increase of 1.0 percent in the March 2012 quarter.

In the June 2012 quarter, increased economic activity was due to rises in all major industry groups: service industries (up 0.7 percent), primary industries (up 3.6 percent), and goods producing industries (up 0.9 percent).

The main movements by industry this quarter were:

  • Agriculture (up 4.7 percent). Increased milk production, due to continued favourable growing conditions, was the main driver behind the rise.
  • Construction (up 3.3 percent). Heavy and civil engineering, such as construction of roads and bridges, had the largest increase this quarter. Residential building construction was also up, boosted by an increase in Canterbury.
  • Transport, postal, and warehousing (up 2.7 percent). This is the largest increase since a 2.7 percent rise in the March 2008 quarter.
  • Manufacturing (up 0.8 percent), following a 1.9 percent rise in the March 2012 quarter.
  • Electricity, gas, water, and waste services (down 2.4 percent), the fifth consecutive quarterly fall in this industry, due to a decline in electricity generation.

Economic activity for the year ended June 2012 was up 2.0 percent when compared with the year ended June 2011. This is the largest annual increase since a 2.5 percent rise in the year ended March 2008.

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

Activity in the June 2012 quarter was 2.6 percent higher than in the June 2011 quarter.

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

Expenditure on gross domestic product – main movements

The expenditure measure of GDP rose 0.3 percent in the June 2012 quarter. The expenditure and production measures 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:

  • Gross fixed capital formation (up 3.1 percent), due to increased investment in plant, machinery, and equipment.
  • Household consumption expenditure (up 0.2 percent), due to a rise in expenditure on durable goods, with expenditure on both non-durables and services remaining flat.
  • Exports of goods and services (down 1.2 percent), mainly due to lower exports of agriculture and fishing primary products, and dairy products.
  • Imports of goods and services (down 2.9 percent), mainly due to lower imports of intermediate goods.

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

Expenditure on GDP for the year ended June 2012 increased 1.7 percent, when compared with the year ended June 2011.

Explanation of the seasonally adjusted balancing item

Seasonal adjustment removes seasonal variation from a statistical series. By removing seasonal effects from GDP, we can better understand the underlying economic activity. Examples of seasonal variation in economic activity are milking and lambing seasons, Christmas shopping, and peak periods for visitors to New Zealand.

The seasonal adjustment balancing item is the difference between directly seasonally adjusting total GDP compared with seasonally adjusting each component of GDP and adding them together. Directly seasonally adjusting total GDP is the preferred method. The seasonal adjustment balancing item does not contribute to GDP and therefore should not be interpreted as an economic variable. Nor should the seasonally adjusted balancing item be interpreted as a margin of error for the headline measure of GDP as over the course of a year it balances out to zero.

Statistics NZ has always seasonally adjusted quarterly GDP in line with international best practice. For more information about seasonal adjustment, see the data quality section of this release.

GDP by industry – primary, goods-producing, and services all up

Agriculture at highest levels due to milk production 

Activity in the primary industries increased 3.6 percent in the June 2012 quarter, the largest increase since a 3.9 percent rise in the September 2009 quarter. The main contributor to the latest rise was a 4.5 percent increase in agriculture, forestry, and fishing activity, driven by a 4.7 percent increase in agriculture production. Higher milk production was the main contributor to the rise in agriculture, due to continuing favourable growing conditions. Activity in the agriculture industry is now at its highest level since the series began in the June 1987 quarter.

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

Forestry and logging up

Forestry and logging activity increased 5.5 percent. This increase follows two consecutive quarterly decreases, and is the largest rise since a 5.8 percent increase in the December 2006 quarter. Exports of forestry primary products also rose this quarter, as reflected in the expenditure measure of GDP.

Mining activity increased 1.5 percent, the fourth consecutive quarterly increase. The latest increase was due to a rise in extraction activity. Mining measures exploration activity, and the extraction of oil, gas, minerals, and coal.

Growth in primary industries for the year

For the year ended June 2012, primary industry activity was up 3.1 percent, when compared with the year ended June 2011. This was due to agriculture, forestry, and fishing, which all increased over the year. This was partly offset by mining, where activity was 3.5 percent lower when compared with the year ended June 2011.

Goods-producing industries boosted by construction

In the June 2012 quarter, activity in the goods-producing industries rose 0.9 percent. After declining in 2011, activity in these industries is now back to its December 2010 quarter level. The main driver of the latest rise was a 3.3 percent increase in the construction industry, the largest since a 7.7 percent rise in the June 2010 quarter. Manufacturing (up 0.8 percent) also contributed to the rise. These increases were offset by a 2.4 percent decline in electricity, gas, water, and waste services.

The rise in construction activity this quarter was due to heavy and civil construction (which includes infrastructure such as roads and bridges) and residential building. This is the largest quarterly increase for heavy and civil construction since the June 1999 quarter, and it is now at its highest level since the series began in the June 1987 quarter. Residential building activity also rose this quarter, up 6.2 percent, with construction in Canterbury helping to lift national levels as rebuilding after the earthquakes begins to get under way (see Value of Building Work Put in Place: June 2012 quarter). Residential building construction is up 11.0 percent from the same time last year, when it was at its lowest level since the September 2001 quarter. Partly offsetting these increases was a decrease in non-residential building, which is at its lowest level since the June 2003 quarter. This construction activity is also reflected in investment in heavy and civil infrastructure and residential buildings in the expenditure measure of GDP.

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

Manufacturing rises again

The rise in manufacturing activity this quarter (up 0.8 percent) followed an increase of 1.9 percent in the March 2012 quarter. The latest increase was due to a 5.1 percent increase in transport equipment, machinery, and equipment manufacturing. This increase, combined with imports, is consistent with the rise in investment in plant, machinery, and equipment this quarter.

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

Also contributing to the rise in manufacturing activity were rises in the non-metallic mineral (up 9.5 percent), food, beverage, and tobacco (up 0.6 percent) and the textile and apparel (up 3.5 percent) industries.

Partly offsetting these increases in manufacturing were declines in:

  • printing, down 7.3 percent
  • wood and paper products, down 1.3 percent
  • furniture and other manufacturing, down 6.8 percent.
  • metal product manufacturing, down 0.6 percent.

Activity in electricity, gas, water, and waste services was down 2.4 percent in the June 2012 quarter. This is the fifth consecutive quarterly fall for the industry, which resulted in a 3.6 percent fall for the year ended June 2012, compared with the year ended June 2011. Electricity generation, due to lower hydro levels this quarter, was the main driver of the fall. Partly offsetting the decrease was a rise in waste collection.  

Goods-producing industries flat for the year

For the year ended June 2012, activity in the goods-producing industries was down 0.1 percent compared with the year ended June 2011. This flat result was due to a 4.8 percent annual fall in construction activity, offset by a 2.8 percent increase in manufacturing for the same period.

Activity in services industries up

In the June 2012 quarter, activity in the service industries rose 0.7 percent, the sixth consecutive quarterly increase. The rise this quarter was due to a 2.7 percent increase in transport, postal, and warehousing services.

Air transport rebounds, business services up

Transport, postal, and warehousing activity increased 2.7 percent in the June 2012 quarter, the largest since a 2.7 percent increase in the March 2008 quarter. Air transport activity, which was up 10.7 percent on the June 2011 quarter, drove the latest rise. In the June 2011 quarter, air transport was disrupted as a result of the ash cloud from the Chilean volcano eruption. Partly offsetting the latest increase was a decline in rail transport services activity. All other areas of transport, postal, and warehousing were up this quarter.

Professional, scientific, technical, administration, and support services activity increased 1.0 percent in the June 2012 quarter. This industry includes business services, such as legal, accounting, scientific research, and advertising. The latest rise is the sixth consecutive quarterly increase, and levels for this industry are at the highest since the series began in the June 1987 quarter.

House sales and retail up

Rental, hiring, and real estate services activity increased 0.7 percent in the June 2012 quarter. The increase this quarter was due to property operators and real estate services, which reflects an increase in house sales volumes.

Retail, accommodation, and restaurants increased 1.1 percent in the June 2012 quarter, following a 0.6 percent decrease in the March 2012 quarter. Both retail trade, and accommodation and restaurants were up this quarter, with the main driver being retail trade (up 1.1 percent). The Retail Trade Survey: June 2012 quarter reported an overall increase of 1.3 percent.

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

Finance and insurance services increased 0.7 percent in the June 2012 quarter, after a decrease of 0.3 percent in the March 2012 quarter. This industry is now at its highest level since the series began in the June 1987 quarter.

Graph, Financial and insurance services, quarterly change, June 2006 to June 2012.

Falls in telecommunications and government

Information media and telecommunication services fell 0.1 percent in the June 2012 quarter, the sixth consecutive quarterly decrease. This follows a 3.0 percent fall in the March 2012 quarter. The latest decrease was due to a fall in telecommunications, as a result of lower call minutes.

Public administration and safety decreased 0.2 percent in the June 2012 quarter, after a 1.2 percent rise in the March 2012 quarter. The decrease in the latest quarter was driven by a fall in central government, administration, defence, and public safety which was partly offset by an increase in local government administration.

Services industries up for the year 

For the year ended June 2012, activity in the service industries increased 2.2 percent. The main contributor to the latest rise was a 7.9 percent increase in professional, scientific, technical, administration, and support services.

 

Expenditure on GDP up 0.3 percent

Expenditure on GDP increased 0.3 percent in the June 2012 quarter, following a revised increase of 0.4 percent in the March 2012 quarter.

For the year ended June 2012, expenditure on GDP increased 1.7 percent compared with the year ended June 2011.

While the production-based measure and the 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.

The expenditure and production-based measures are reconciled annually, through tracing the supply and use of goods and services in the economy. This is the approach used by statistical agencies internationally as there is a greater range of data available annually than quarterly. This reconciliation feeds through to the quarterly GDP series in the September reference quarter released in December.

Household consumption expenditure up 0.2 percent 

Household final consumption expenditure was up 0.2 percent in the June 2012 quarter. Within household consumption expenditure, spending on durable goods was up, while spending on both non-durable goods and services remained flat. Household consumption expenditure measures the volume of spending on goods and services by New Zealand resident households.

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

The volume of durable goods purchased by New Zealand households increased 1.0 percent (or $59 million) in the June 2012 quarter, following an increase of 0.7 percent in the March 2012 quarter. The main driver for the increase this quarter was increased spending on transport goods, which includes motor vehicles, motorcycles, and bicycles.

Household consumption of non-durable goods was flat in the June 2012 quarter, following a 0.6 percent decrease in the March 2012 quarter.

The volume of household expenditure on services was flat in the June 2012 quarter, following a 0.4 percent increase in the March 2012 quarter.

The total volume of spending in New Zealand was up 0.7 percent. This increase was partly offset by the volume of spending by New Zealand residents overseas, which was down 7.6 percent in the June 2012 quarter. Although spending by New Zealand residents abroad fell this quarter, it is still at historically high levels reflecting the high New Zealand dollar. Conceptually, spending by New Zealand residents overseas is included in household consumption expenditure as it is spending by New Zealand households. Spending by overseas visitors in New Zealand is subtracted from household consumption expenditure as it is spending by overseas households. Spending by overseas visitors in New Zealand decreased 1.4 percent.

Household expenditure up 2.5 percent for the year 

For the year ended June 2012, the volume of household consumption expenditure increased 2.5 percent, compared with a 0.8 percent rise in the year ended June 2011. The latest rise was due to increased spending on durables (up 6.5 percent), non-durables (up 2.7 percent), and services (up 1.0 percent).

Investment in fixed assets up

Gross fixed capital formation (GFKF) increased 3.1 percent in the June 2012 quarter, following a rise of 2.0 in the March 2012 quarter. The level of fixed assets is 14.2 percent lower than the December 2007 quarter peak. GFKF consists of business investment plus residential building investment.

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

Investment in residential buildings increased 5.7 percent, following a revised increase of 0.9 percent in the March 2012 quarter. Investment in residential buildings has now increased in each of the last four quarters. The latest increase is reflected in higher construction activity, as measured in the production measure of GDP. For the year ended June 2012, residential building investment declined 3.8 percent. 

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

Continued growth in business investment

Business investment in fixed assets, which is total GFKF excluding residential building, increased 2.8 percent in the June 2012 quarter, after an increase of 2.0 percent in the March 2012 quarter. The latest increase is the largest since a 4.7 percent rise in the December 2010 quarter and was mainly due to investment in plant, machinery, and equipment (up 12.8 percent) and other construction (up 20.7 percent). Investment in plant, machinery, and equipment in the latest quarter is consistent with a rise in the import of capital goods, and is now at its highest level since the June 2008 quarter peak. The increase in other construction is the largest since a 21.7 percent increase in the March 1999 quarter. Other construction is not seasonally adjusted.

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

Partly offsetting these increases were decreases in transport equipment (down 20.4 percent) and non-residential building (down 6.3 percent).

Investment in fixed assets flat for the year

For the year ended June 2012, GFKF was flat, compared with a 6.8 percent increase for the year ended June 2011. Plant, machinery, and equipment increased 11.1 percent in the latest year, while investment in non-residential buildings decreased 8.2 percent.

Build-up in inventories as supply exceeds demand 

In the June 2012 quarter, the supply of goods produced exceeded demand, leading to a $484 million build-up in inventories. A build-up in inventories can also reflect expected future demand. The build-up this quarter was driven by distribution inventories ($484 million), due to wholesale trade inventories.

Government final consumption expenditure rises

General government final consumption expenditure increased 0.8 percent in the June 2012 quarter, following a 0.3 percent decrease in the March 2012 quarter. Both central government (up 0.1 percent) and local government (up 6.2 percent) contributed to the increase. 

Annual general government expenditure

For the year ended June 2012, general government final consumption expenditure increased 0.7 percent.

Net exports up as exports fall by less than imports

Export volumes down

Export volumes of goods and services decreased 1.2 percent in the June 2012 quarter, following a 2.2 percent decrease in the March 2012 quarter.

The volume of goods exported decreased 2.0 percent in the June 2012 quarter, following a 0.8 percent decrease in the March 2012 quarter. The main drivers of this decrease were:

  • agriculture and fishing primary products (down 8.4 percent)
  • dairy products (down 2.6 percent)
  • wood and paper products (down 4.1 percent).

Partly offsetting the decrease this quarter were increases in:

  • forestry primary products (up 36.5 percent)
  • coal, crude petroleum, ores, minerals, and gases (up 13.1 percent)
  • meat products (up 1.9 percent)
  • other food, beverages, and tobacco (up 1.1 percent).

Exports of services decline

Exports of services decreased 1.7 percent in the June 2012 quarter, following a 4.5 percent fall in the March 2012 quarter. The decrease in the latest quarter was driven by exports of travel services (down 3.2 percent).

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

Import volumes down

Import volumes of goods and services decreased 2.9 percent in the June 2012 quarter, following an increase of 3.8 percent in the March 2012 quarter.

The volume of goods imported decreased 2.5 percent in the June 2012 quarter, following an increase of 4.6 percent in the March 2012 quarter. The main contributor to this decrease was intermediate goods (down 11.9 percent), with primary fuels and lubricants the largest contributor to the fall, after a large increase in the March 2012 quarter.

Partly offsetting the decrease this quarter was an increase in capital goods imported (up 4.3 percent), driven by plant, machinery, and equipment, which is consistent with gross fixed capital formation.

The volume of services imported decreased 4.2 percent in the June 2012 quarter, following a 2.5 percent increase in the March 2012 quarter. Falls in travel services (down 7.2 percent) and transport services (down 3.9 percent) were the main contributors this quarter. The fall in the volume of travel services imported is consistent with the fall in New Zealand household expenditure overseas.

Export and import volumes both up for the year

For the year ended June 2012, export volumes of goods and services increased 2.5 percent, driven mainly by dairy products (up 8.3 percent). Over the same period, import volumes increased 4.0 percent, driven mainly by imports of plant, machinery, and equipment (up 19.2 percent) and passenger motor cars (up 17.6 percent).

Revisions were incorporated as a result of new levels of exports and imports of services as published in the Balance of Payments and International Investment Position: June 2012 quarter release.

Implicit price deflators

The GDP implicit price deflator (IPD) for the year ended June 2012 increased 1.8 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 2.2 percent for the year ended June 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 1.0 percent for the year ended June 2012 (see Consumers Price Index: June 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 year ended June 2012, compared with GDP which rose 2.0 percent. 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 of this release.  

The merchandise terms of trade has fallen for four consecutive quarters (see Overseas Trade Indexes (Prices): June 2012 quarter (provisional)). This fall in the terms of trade resulted in RGNDI growth lower than GDP growth for the year ended June 2012.

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

RGNDI was revised this quarter mainly due to revisions coming from the Balance of Payments and International Investment Position: June 2012 quarter release. Revisions that affected RGNDI were:

  • exports and imports of services as new benchmarks were incorporated
  • revised treatment of the Canterbury earthquakes' impact on investment income 
  • new tax data resulting in revisions to income receipts and payments with the rest of the world.

 All of these revisions will also flow into the external transaction account and calculation of national savings in the National Accounts: Year ended March 2012 release, which will be published on 21 November 2012.

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

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