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

New Zealand economy grows 1.1 percent

Gross domestic product (GDP) was up 1.1 percent in the March 2012 quarter, following an increase of 0.4 percent in the December 2011 quarter.

In the March 2012 quarter, increased economic activity was due to rises in the service industries (up 0.4 percent), goods-producing industries (up 1.0 percent), and primary industries (up 2.4 percent).

The main movements by industry this quarter were:

  • Professional, scientific, technical, administration, and support services (up 2.0 percent). This is the fifth consecutive quarterly increase in this industry.
  • Manufacturing (up 1.8 percent). Food, beverage, and tobacco manufacturing increased 3.2 percent with rises in both meat and dairy product manufacturing. Metal product manufacturing increased 6.1 percent.
  • Agriculture (up 2.3 percent), due to increased milk production.
  • Wholesale trade (up 1.2 percent), following a 2.6 percent rise in the December 2011 quarter. 
  • Public administration and safety (up 1.4 percent), with increases in central government administration, defence, and public safety; and local government administration.

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

Economic activity for the year ended March 2012 was up 1.7 percent when compared with the year ended March 2011.

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

Activity in the March 2012 quarter was 2.4 percent higher than in the March 2011 quarter.

Expenditure on gross domestic product – main movements

The expenditure measure of GDP rose 0.8 percent in the March 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:

  • Household consumption expenditure (up 0.1 percent). The rise this quarter follows a 0.1 percent increase in the December 2011 quarter.
  • Gross fixed capital formation (up 1.7 percent). The largest contributor was a $168 million rise in investment in plant, machinery, and equipment.
  • Exports of goods and services (down 1.7 percent). This decrease was mostly due to a fall in exports of travel services, and coal, crude petroleum, ores, minerals, and gases.
  • Imports of goods and services (up 4.1 percent). The rise was led by intermediate goods, capital goods, and passenger motor cars all growing strongly.

Graph, Gross domestic product by component, change from previous quarter, March 2012 quarter.

Expenditure on GDP for the year ended March 2012 increased 1.0 percent, when compared with the year ended March 2011.

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

Agriculture at highest level in five years

Activity in the primary industries increased 2.4 percent in the March 2012 quarter. This is the largest increase in the primary industries since a 3.8 percent rise in the September 2009 quarter. The largest contributor to the latest rise was a 2.1 percent increase in agriculture, forestry, and fishing activity, driven by a 2.3 percent increase in the agriculture industry. Higher milk production, due to continued good growing conditions throughout the March 2012 quarter, was the main contributor to the latest increase in agriculture. Activity in the agriculture industry is now at its highest level since the December 2006 quarter, and is 7.5 percent higher than in the March 2011 quarter.

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

Forestry and logging falls

Partly offsetting the increase in agriculture activity was a 1.4 percent fall in forestry and logging activity. This is its second consecutive quarterly decline, following a 0.6 percent fall in the December 2011 quarter and after 11 consecutive quarters of growth. In the March 2012 quarter, exports of forestry primary products declined, reflecting the fall in activity.

Mining activity increased 3.4 percent in the March 2012 quarter, following increases in the December 2011 and September 2011 quarters (2.1 percent and 3.2 percent, respectively). The latest increase in activity was due to a rise in exploration and other services to mining. Despite mining increasing over the three quarters, the level of activity in the March 2012 quarter is still 2.4 percent lower than in the March 2011 quarter.

Graph, Mining, quarterly change, March 2006 to March 2012.

Primary industries fall for year due to mining

For the year ended March 2012, primary industry activity was down 0.5 percent, when compared with the year ended March 2011. This was mainly due to the mining industry, where activity in the year ended March 2012 was down 12.7 percent when compared with the year ended March 2011.

Manufacturing pushes up activity in goods-producing industries

In the March 2012 quarter, activity in the goods-producing industries rose 1.0 percent. This followed declines in all four quarters of 2011. Activity in the goods-producing industries declined in 13 of the past 17 quarters. These decreases have resulted in activity in the March 2012 quarter being 11.6 percent lower than the peak level, which was in the December 2007 quarter. The main driver to the rise in goods-producing activity this quarter was a 1.8 percent increase in the manufacturing industry. Other goods-producing industries recorded declines in the March 2012 quarter, with electricity, gas, water, and waste services falling 0.7 percent, and construction declining 0.1 percent.

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

Increased activity in manufacturing followed a decline of 1.9 percent in the December 2011 quarter. A 3.2 percent increase in food, beverage, and tobacco manufacturing was the main contributor to the latest rise, mainly driven by an increase in dairy product manufacturing. Meat product manufacturing also increased. Both of these rises are consistent with increased exports of these products this quarter.

The Economic Survey of Manufacturing: March 2012 quarter reported a 0.9 percent fall in the volume of meat and dairy sales. The ESM measures sales, while GDP measures production. Direct volume measures are used to estimate meat and dairy production in GDP. The indicator for meat manufacturing in GDP is livestock slaughters, while for dairy the physical volume of dairy products produced is used.

Also contributing to the rise in manufacturing was a 6.1 percent increase in metal product manufacturing. This is the largest increase since a 10.0 percent rise in the June 2001 quarter. Exports of metal products, machinery, and equipment declined this quarter contributing to the build-up in manufacturing inventories.

Partly offsetting these increases in manufacturing were declines in:

  • petroleum, chemical, polymer, and rubber product manufacturing, down 1.4 percent
  • transport equipment, machinery, and equipment product manufacturing, down 1.5 percent.

Electricity, gas, water, and waste services decline

Activity in electricity, gas, water, and waste services was down 0.7 percent in the March 2012 quarter. This is the fourth consecutive quarterly fall for the industry, which has resulted in activity for the year ended March 2012 being 2.3 percent lower than the year ended March 2011. This is the largest annual decline for this industry in a March year since a 3.4 percent fall in the year ended March 2002. The fall in the latest quarter is due to a decline in electricity generation and on-selling value added.

Construction activity remains low

Construction activity was flat in the March 2012 quarter, down 0.1 percent or $1 million, following a 2.5 percent increase in the December 2011 quarter. Within construction, residential building activity declined, with this almost being fully offset by a rise in non-residential building construction. Both of these movements are consistent with investment as shown in gross fixed capital formation, with investment in residential buildings declining, and investment in non-residential buildings increasing this quarter. Additionally, the level of activity in the construction industry this quarter is 25.0 percent below the peak in the December 2007 quarter, and is similar to levels last recorded in the December 2003 quarter.

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

The Value of Building Work Put in Place: March 2012 quarter information release reported that Canterbury showed increased signs of post-earthquake rebuild activity, particularly for non-residential work. The indicators for the rest of New Zealand showed moderately reduced building activity.

Goods-producing industries down for year due to construction

For the year ended March 2012, activity in the goods-producing industries was down 0.6 percent compared with the year ended March 2011. An 8.1 percent fall in construction activity for the year ended March 2012, when compared with the previous year, was the main contributor to this fall. Activity in manufacturing was up 3.1 percent over the same period, partly offsetting the fall in construction. This is the first time manufacturing activity has risen in a March year since March 2008.

Services industries up

In the March 2012 quarter activity in the service industries rose 0.4 percent, following a 0.8 percent rise in the December 2011 quarter.

Professional, scientific, technical, administrative, and support services activity increased 2.0 percent in the March 2012 quarter, the largest contributor to the overall increase in services activity. This industry includes business services, such as legal and accounting, scientific research, and advertising. The latest rise is the fifth consecutive quarterly increase, and follows a 2.1 percent increase in the December 2011 quarter.

Graph, Professional, scientific, tecnical, administration, and support services, quarterly change, March 2006 to March 2012.

Health care and social assistance, wholesale trade, and public administration and safety up

Health care and social assistance activity increased 1.3 percent in the March 2012 quarter, following increases of 1.0 percent and 1.5 percent in the December 2011 and September 2011 quarters, respectively. The increase in the latest quarter is reflected in the household consumption expenditure component on the expenditure measure of GDP, where the volume of spending on health increased. Wholesale trade activity (up 1.2 percent) also contributed to the increase in service activity this quarter.

Public administration and safety activity increased 1.4 percent in the March 2012 quarter, following a revised 0.6 percent decline in the December 2011 quarter. Within public administration and safety, both local government administration (up 1.5 percent), and central government administration, defence, and public safety (up 1.4 percent) contributed to the latest rise. The latest rise in central government administration, defence, and public safety follows a revised 0.3 percent fall in the December 2011 quarter.

Graph, Public administration and safety, quarterly change, March 2006 to March 2012.

Information media and telecommunications, and retail trade and accommodation down

Partly offsetting the increases in health care and social assistance, wholesale trade, and public administration and safety was lower activity in information media and telecommunication services (down 3.0 percent), and retail trade and accommodation (down 0.6 percent). The latest decline in information media and telecommunications is the largest since a 3.4 percent fall in the March 2006 quarter. The fall this quarter was driven by a fall in telecommunication services. This is reflected in lower expenditure on telecommunication services by households, as measured in household consumption expenditure. Under the new industry classification (Australian and New Zealand Standard Industrial Classification 2006 or ANZSIC06), the information media and telecommunication services series is not seasonally adjusted as it has no seasonal pattern. The previous series for communication services was seasonally adjusted as it had a stronger seasonal pattern due to postal services also being included in the industry.

Graph, Information media and telecommunications, quarterly change, March 2006 to March 2012.

The 0.6 percent fall in retail trade and accommodation activity is the first decline since a 0.9 percent fall in the December 2010 quarter. The level of activity for retail trade and accommodation reached a record-high in the December 2011 quarter, with the 2011 Rugby World Cup tournament contributing to this. Despite the fall in the latest quarter, the level of activity still remains high, with activity in the March 2012 quarter 0.7 percent higher than the previous peak in the March 2007 quarter. The fall in the latest quarter was mainly driven by a 1.8 percent decline in accommodation and food services, while retail trade activity was flat. In the year ended March 2012, activity for retail trade and accommodation was 4.5 percent higher than the year ended March 2011. This was mainly due to large quarterly increases in the December 2011, and September 2011 quarters, with the 2011 Rugby World Cup tournament spanning across these two quarters.

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

Annual increase in services strong

For the year ended March 2012, activity in the service industries increased 2.2 percent. This is the largest annual growth in the service industries since a 2.4 percent increase in the year ended June 2008. The main contribution to the latest rise was a 7.8 percent rise in professional, scientific, technical, administrative, and support services. This is the largest annual increase in this industry since an 8.1 percent increase in the year ended December 2002.

Expenditure on GDP up 0.8 percent

Expenditure on GDP increased 0.8 percent in the March 2012 quarter, following an increase of 0.4 percent in the December 2011 quarter.

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 quarter-on-quarter changes.

For the year ended March 2012, expenditure on GDP increased 1.0 percent compared with the year ended March 2011.

Household consumption expenditure up 0.1 percent 

Household final consumption expenditure increased 0.1 percent in the March 2012 quarter, the fifth consecutive quarterly increase. Household consumption expenditure measures the volume of spending on goods and services by New Zealand resident households. The volume of durable goods purchased by New Zealand households increased 0.9 percent in the March 2012 quarter, following an increase of 4.3 percent in the December 2011 quarter. Household expenditure on durable goods is now at its highest level since the series began in June 1987. The main driver for the increase this quarter was increased spending on transport goods, which includes new and used motor vehicles, motorcycles, and bicycles.

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

Household consumption of non-durable goods decreased 0.5 percent in the March 2012 quarter, following a 0.3 percent decrease in the December 2011 quarter. The main driver of the decline in the volume of expenditure on non-durable goods was retail food (supermarkets and grocery stores).

The volume of household expenditure on services increased 0.5 percent in the March 2012 quarter, following a 0.3 percent decrease in the December 2011 quarter. The increase this quarter was due to increased spending on restaurants and transport services, partly offset by a decrease in communication services.

The total volume of spending in New Zealand was down 0.9 percent, with some of this spending by overseas visitors to New Zealand. 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 not spending by New Zealand households.

The volume of spending by New Zealand residents overseas increased 16.5 percent in the March 2012 quarter as New Zealanders spent more goods and services on their overseas holidays. This increase is the largest since the series began in June 1986. Spending by overseas visitors in New Zealand decreased 6.5 percent following the Rugby World Cup. These results were consistent with imports and exports of travel services. 

Household expenditure up 2.2 percent for the year 

For the year ended March 2012, the volume of household consumption expenditure increased 2.2 percent, compared with a 1.5 percent increase in the year ended March 2011. The latest rise was due to increased spending on durables (up 5.6 percent), non-durables (up 2.4 percent), and services (up 0.9 percent).

Investment in fixed assets up 

Gross fixed capital formation (GFKF) increased 1.7 percent in the March 2012 quarter, following a 1.6 percent rise in the December 2011 quarter. Despite these increases, the level of investment in fixed assets is still 16.8 percent lower than the peak level recorded in the December 2007 quarter. GFKF consists of business investment plus residential building investment.

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

Investment in residential buildings declined 0.6 percent in the March 2012 quarter, following a 4.3 percent increase in the December 2011 quarter. This decline is reflected in lower construction activity, as measured in the production measure of GDP. For the year ended March 2012, residential building investment decreased 11.9 percent.

Graph, gross fixed capital formation - residential building, quarterly change, March 2006 to March 2012.

Business investment increases

Business investment in fixed assets, which is total GFKF excluding residential building, increased 2.1 percent in the March 2012 quarter. This is the largest increase since a 4.8 percent rise in the December 2010 quarter. The main contributors to the increase were investment in:

  • plant, machinery, and equipment (up 5.2 percent), which is consistent with an increase in the import of capital goods
  • non-residential building (up 2.1 percent).

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

Partly offsetting these increases were decreases in other construction (down 8.0 percent) and intangibles (down 8.0 percent). The decrease in intangibles was driven by investment in software, which caused the level of intangibles to reach its lowest level since the June 2009 quarter.

Investment in fixed assets down for the year

For the year ended March 2012, GFKF decreased 0.9 percent, compared with a 6.2 percent increase in the year ended March 2011. The main contributors to the latest annual decrease were residential building (down 11.9 percent) and non-residential building (down 7.2 percent).

Build-up in inventories as supply exceeds demand 

In the March 2012 quarter, the supply of goods produced exceeded demand leading to a $416 million build-up in inventories. The build-up this quarter was driven by manufacturing inventories ($304 million), due to increased manufacturing activity reflected in the production measure of GDP. An increase in imported goods and the decrease in the export of goods have also contributed to the stock build-up this quarter.

Offsetting the latest increases was a $199 million run-down in distribution inventories, mainly driven by wholesale trade inventories.

Government final consumption expenditure rises

General government final consumption expenditure increased 0.5 percent in the March 2012 quarter, following a 0.7 percent decrease in the December 2011 quarter. Both central government (up 0.6 percent) and local government (up 0.2 percent) contributed to the increase this quarter. The increase in central government is the largest since a 1.1 percent rise in the March 2010 quarter (where the level of expenditure peaked).

 Graph, General government final consumption, quarterly change, March 2006 to March 2012.

Annual general government expenditure

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

Net exports decline

Export volumes down

Export volumes of goods and services decreased 1.7 percent in the March 2012 quarter, following an increase of 2.9 percent in the December 2011 quarter. This decrease is the largest since a 2.1 percent decrease in the September 2008 quarter.

The volume of goods exported decreased 0.3 percent in the March 2012 quarter, following a 4.3 percent increase in the December 2011 quarter. The main drivers of this decrease were:

  • coal, crude petroleum, ores, minerals, and gases (down 16.7 percent)
  • metal products, machinery, and equipment (down 2.0 percent).

Offsetting these decreased exports were:

  • dairy products (up 3.1 percent)
  • wood and paper products (up 7.4 percent).

Exports of services return to pre-Rugby World Cup levels

Exports of services decreased 3.5 percent in the March 2012 quarter, following a 0.6 percent fall in the December 2011 quarter. The decrease in the latest quarter was driven by exports of travel services (down 4.9 percent), returning back to pre-Rugby World Cup levels.

Import volumes up 4.1 percent

Import volumes of goods and services increased 4.1 percent in the March 2012 quarter, following a 2.2 percent fall in the December 2011 quarter.

The volume of goods imported increased 4.6 percent in the March 2012 quarter. The main contributors to this increase were:

  • intermediate goods (up 7.0 percent), driven by primary fuels and lubricants
  • capital goods (up 6.7 percent), driven by machinery and plant (up 3.7 percent). This is also reflected in investment of these types of goods.

Partly offsetting the increase this quarter was a decrease in transport equipment (down 19.7 percent).

The volume of services imported increased 2.8 percent in the March 2012 quarter, following a 3.6 percent decrease in the December 2011 quarter. The main contributor to this increase was a rise in travel services imported (up 15.9 percent). This increase is consistent with the rise in New Zealand household expenditure overseas (up 16.5 percent) which shows that New Zealanders purchased more goods and services abroad while on holiday.

Export and import volumes both up for the year

For the year ended March 2012, export volumes increased 1.9 percent, driven mainly by dairy export volumes (up 8.9 percent). Over the same period, import volumes increased 6.0 percent, driven mainly by capital goods imported (up 14.3 percent).

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

Implicit price deflators

The GDP implicit price deflator (IPD) for the year ended March 2012 increased 2.1 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 1.7 percent for the year ended March 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 1.6 percent for the year ended March 2012 (see Consumers Price Index: March 2012 quarter). The CPI measures the rate of price change of goods and services purchased by households.

Real gross national disposable income up 1.7 percent for the year

Real gross national disposable income increased 1.7 percent for the year ended March 2012, matching GDP growth over the same period. 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.  

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

Contribution to change

The following table shows the contribution to change by industry to the total GDP movement.

Gross domestic product by industry
Chain-volume series expressed in 1995/96 prices, March 2012 quarter

 Industry

 Percentage change from previous quarter

 Percentage point contribution to change(1)

 Percentage change in annual values

 Percentage change from same quarter of previous year

Agriculture, forestry and fishing

 2.1

 0.1

 5.1

 5.4

Mining

 3.4

 0.1

 -12.7

 -2.3

Manufacturing

 1.8

 0.2

 3.1

 2.6

Electricity, gas, water, and waste services

 -0.7

 0.0

 -2.3

 -5.9

Construction

 -0.1

 0.0

 -8.1

 -3.8

Wholesale trade

 1.2

 0.1

 2.9

 2.7

Retail trade, and accommodation

 -0.6

 0.0

 4.5

 4.7

Transport, postal, and warehousing

 -0.4

 0.0

 0.9

 0.1

Information media, and telecommunications

 -3.0

 -0.1

 -3.4

 -5.8

Financial and insurance services

 0.1

 0.0

 2.1

 3.0

Rental, hiring, and real estate services

 0.4

 0.0

 1.0

 1.1

Prof, scientific, technical, admin, and support

 2.0

 0.2

 7.8

 9.8

Public administration and safety

 1.4

 0.1

 3.6

 3.2

Education and training

 0.1

 0.0

 0.4

 0.4

Health care and social assistance

 1.3

 0.1

 -0.4

 2.2

Arts, recreation, and other services

 -0.8

 0.0

 -1.3

 -2.3

Unallocated and balancing item(2)

 ...

 0.3

 ...

 ...

 Gross domestic product

 1.1

 1.1

 1.7

 2.4

1. Percentage point contributions may not sum to gross domestic product due to rounding.
2. Includes unallocated taxes on production and imports, bank service charge, and the seasonal adjustment balancing item.
Symbol: ... not applicable

The following table shows the contribution to change by component to the total GDE movement. 

Expenditure on gross domestic product
Chain-volume series expressed in 1995/96 prices
March 2012 quarter

 Component

 Percentage change from previous quarter

 Percentage point contribution to change (1)

 Percentage change in annual values

 Percentage change from same quarter of previous year

Final consumption expenditure

Private

 0.1

 0.0

 2.0

 2.7

General government

 0.5

 0.1

 0.3

 0.4

Gross fixed capital formation  

Residential buildings

 -0.6

 0.0

 -11.9

 -4.1

Other fixed assets

 2.1

 0.2

 2.4

 -0.7

Exports of goods and services

 -1.7

 -0.6

 1.9

 1.3

Imports of goods and services

 4.1

 -1.3

6.0

 6.8

Change in inventories and balancing item (2)

 ...

 2.3

 ...

 ...

Expenditure on gross domestic product

 0.8

 0.8

 1.0

 2.0

1. Percentage point contributions may not sum to expenditure on gross domestic product due to rounding.
2. Includes the change in inventories and the seasonal adjustment balancing item.
Symbol: ... not applicable

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

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