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Gross Domestic Product: March 2013 quarter
Embargoed until 10:45am  –  20 June 2013
Commentary

New Zealand economy grows 0.3 percent

Gross domestic product (GDP) was up 0.3 percent in the March 2013 quarter, following a 1.5 percent rise in the December 2012 quarter.

The main movements by industry were:

  • Professional, scientific, technical, administrative, and support services (up 3.9 percent), the largest increase in this industry since the December 2001 quarter. The latest rise was driven by engineering design and consulting services.
  • Construction (up 5.5 percent), due to increased activity in residential building and construction services in Canterbury.
  • Agriculture, forestry, and fishing (down 4.8 percent), mainly driven by a fall in agriculture activity. Lower dairy production – a result of the dry weather conditions during the March 2013 quarter – contributed to the fall.
  • Information media and telecommunications (down 3.1 percent), as a result of fewer call minutes.

Graph, Gross domestic product by industry, change from previous quarter, March 2013 quarter.

Economic activity for the year ended March 2013 was up 2.5 percent when compared with the March 2012 year.

Graph, Gross domestic product, annual change, March 2007 to March 2013.

Activity in the March 2013 quarter was 2.4 percent higher than in the March 2012 quarter.

Expenditure on GDP – main movements

The expenditure measure of GDP (GDE) rose 0.3 percent in the March 2013 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 these goods and services were used.

The main movements in GDE this quarter were:

  • Household consumption expenditure (up 0.4 percent), due to increased spending on non-durable goods such as food and non-alcoholic beverages. Spending on durables and services was also up. This quarter's increase in household spending on non-durable goods is the largest since the September 2011 quarter.
  • Gross fixed capital formation (up 0.3 percent), with residential building investment (up 9.6 percent) the largest contributor. This is the largest increase in residential building investment since the September 2002 quarter.
  • Inventories were built up $340 million, with a build-up in manufacturing stocks.
  • Exports of goods and services (up 2.5 percent) rose for the third consecutive quarter. Increased exports of agriculture and fishing primary products were the main driver behind this quarter's rise.
  • Imports of goods and services (up 2.3 percent), after a 0.7 percent fall in the December 2012 quarter. The rise this quarter was led by more imports of capital and intermediate goods.

Graph, Gross domestic expenditure by component, change from previous quarter, March 2013 quarter.

GDE for the March 2013 year rose 3.1 percent when compared with the March 2012 year.

Drought causes primary industries to fall

Activity in the primary industries fell 3.0 percent in the March 2013 quarter. This was driven by a 4.7 percent decline in agriculture and a 2.5 percent fall in forestry and logging. These falls were partly offset by a 4.2 percent increase in mining.

Dairy pulls agriculture down

Agriculture fell 4.7 percent in the March 2013 quarter. The biggest contributor to this decrease was dairy production. Cattle farming was also down, although there was an increase in slaughter numbers.

Graph, Agriculture, forestry, and fishing, quarterly change, March 2007 to March 2013.

In the March 2013 quarter, there were dry weather conditions across the country. As a result, milk production declined as dairy herds were dried off earlier than usual. Slaughter numbers were up for dairy and also other cattle. These two factors are typical of periods of drought.

In the 2008 drought, there was information to suggest a significant increase in intermediate consumption such as the purchasing of additional feed. This information was used to alter the methodology used for measuring growth in the agriculture industry to better measure the impact of the drought. However, the effects of the 2013 drought have been more significant for output. Milk production has declined, rather than intermediate consumption rising. Therefore, there have been no changes to the methodology used for measuring agriculture this quarter, as the current quarterly indicators have captured the impact of the dry weather conditions on economic growth.

The drought may lead to further falls in production in future quarters. This is because of lower stock levels and poor stock condition which could impact on lambing and calving rates. The full impact of the drought will not be known until the quarterly indicators are reconciled to more comprehensive annual data.

Forestry down

Forestry and logging fell 2.5 percent in the March 2013 quarter. This is after it reached a record-high level in the December 2012 quarter. Over the same period, there was also a fall in forestry exports. Despite the fall in the March 2013 quarter, the level of activity for forestry and logging in the March 2013 year is at its highest.

Extraction drives mining up

Mining increased 4.2 percent in the March 2013 quarter. The increase was driven by extraction, which rose after two consecutive quarters of decline.

Graph, Mining, quarterly change, March 2007 to March 2013.

Primary industries still up for the year despite drought

For the March 2013 year, growth in the primary industries was up 6.0 percent when compared with the March 2012 year. Favourable growing conditions in 2012, which contributed to the March 2013 year, led to an increase in agricultural activity, particularly in dairy production. As a result, agricultural activity rose 7.7 percent for the March 2013 year, despite the fall in the latest quarter.

Construction continues to lead rise in goods-producing industries

Activity in the goods-producing industries was up 1.0 percent in the March 2013 quarter, driven by construction (up by 5.5 percent). This increase was partly offset by a fall in electricity, gas, water, and waste services, which was down 4.4 percent.

Canterbury rebuild leads to construction growth

Construction grew 5.5 percent in the March 2013 quarter, due to large increases in residential building and construction services. Both these industries were boosted by the Canterbury rebuild. Construction activity has grown for four consecutive quarters, and is at its highest level since March 2008. However, construction levels are still 8.0 percent lower than the December 2007 quarter peak.

Graph, Construction, quarterly change, March 2007 to March 2013.

Manufacturing continues to grow

Activity in the manufacturing industry grew 0.2 percent in the March 2013 quarter, following a 1.0 percent rise in the December 2012 quarter. The increase was driven by food, beverage, and tobacco manufacturing (up 3.0 percent) partly due to increased meat product manufacturing. The rise in meat manufacturing reflects higher slaughter numbers. There was also an increase in exports of meat products. Petroleum, chemical, plastic, and rubber product manufacturing (up 2.5 percent) also contributed to the increase this quarter. These increases were partly offset by declines in metal product manufacturing; and transport equipment, machinery, and equipment manufacturing. Manufacturing activity in the March 2013 quarter is the highest since the December 2009 quarter.

Graph, Manufacturing, quarterly change, March 2007 to March 2013.

Electricity, gas, water, and waste services was down 4.4 percent in the March 2013 quarter. This is the largest quarterly fall for this industry since June 2008. The decline was due to a fall in electricity generation, which is linked to the fall in metal product manufacturing. With less activity in metal product manufacturing, the demand for electricity was lower, resulting in less activity for electricity generation and on-selling.

Graph, Electricity, gas, water, and waste services, quarterly change, March 2007 to March 2013.

Goods-producing industries up for the year

Goods producing industries grew 3.1 percent in the March 2013 year. Construction was the biggest contributor, up 10.8 percent. Manufacturing was up 1.6 percent.

Service industries up

Activity in the service industries was up 0.5 percent in the March 2013 quarter, driven by a strong increase in professional, scientific, technical, administrative, and support services (up 3.9 percent). Retail trade and accommodation also contributed to the rise, up 0.8 percent. These increases were offset by falls in information media and telecommunications (down 3.1 percent), and transport, postal, and warehousing (down 1.1 percent).

Business services leads the way

Professional, scientific, technical, administrative, and support services grew 3.9 percent in the March 2013 quarter, the largest quarterly increase in this industry since the December 2001 quarter. The main reason for this was significant growth in architectural and engineering services, particularly in Canterbury and Auckland. To a lesser extent, the 2013 Census of Population and Dwellings also contributed to this growth. Activity from the census is classified as market research, which contributes to this industry.

Graph, Professional, scientific, technical, administration, and support services, quarterly change, March 2007 to March 2013.

Retail up

Activity in retail trade and accommodation grew 0.8 percent in the March 2013 quarter. This was driven by an increase in retail trade (up 0.4 percent) due to supermarkets, and pharmaceuticals and other store-based retailing. The increase is reflected in a rise in household consumption expenditure on food and beverages.

Graph, Retail trade and accommodation, quarterly change, March 2007 to March 2013.

Communications and transport down

Information media and telecommunications fell 3.1 percent in the March 2013 quarter, due to fewer call minutes. Transport, postal, and warehousing fell 1.1 percent in the March 2013 quarter, mainly due to falls in road transport and transport support services.

Graph, Information media and telecommunications, quarterly change, March 2007 to March 2013.

Services up for the year

The service industries grew 1.7 percent in the March 2013 year. This rise was mainly due to a 3.4 percent growth in the professional, scientific, technical, administrative, and support services, and also strong growth in retail trade and accommodation.

Expenditure on GDP up 0.3 percent

GDE rose 0.3 percent in the March 2013 quarter, after a revised increase of 1.3 percent in the December 2012 quarter.

For the March 2013 year, GDE increased 3.1 percent compared with the March 2012 year.

While the production-based 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.

Strong increase in household consumption of non-durable goods

Household final consumption expenditure increased 0.4 percent in the March 2013 quarter, compared with an increase of 1.5 percent in the December 2012 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, March 2007 to March 2013.

The volume of spending on non-durable goods increased 1.0 percent in the March 2013 quarter, the strongest increase since the September 2011 quarter. Spending on non-durable goods rose in five of  the last seven quarters. In the March 2013 quarter, spending on food and non-alcoholic beverages was up. This rise is reflected in a 0.8 percent increase in retail trade and accommodation activity as measured in the production measure of GDP.

The volume of durable goods purchased by New Zealand households increased 0.4 percent in the March 2013 quarter. This is the ninth consecutive quarterly increase since the December 2010 quarter. Spending on audio-visual equipment, and furniture and floor coverings contributed to the latest rise.

Household consumption of services increased 0.2 percent in the March 2013 quarter, after a 1.5 percent increase in the December 2012 quarter. Spending on restaurant meals and international air passenger services was up.

The total volume of spending in New Zealand was up 0.3 percent, after an increase of 0.8 percent in the December 2012 quarter. Spending by New Zealand residents overseas increased 7.1 percent during the March 2013 quarter, while spending by overseas visitors in New Zealand increased 4.8 percent.

Household expenditure up 2.2 percent for the year

For the March 2013 year, the volume of household consumption expenditure increased 2.2 percent compared with the March 2012 year. The latest rise was due to increased spending on durables (up 5.1 percent), non-durables (up 0.8 percent), and services (up 2.0 percent).

Strong investment in residential building

Gross fixed capital formation (GFKF) increased 0.3 percent in the March 2013 quarter, after an increase of 2.4 percent in the December 2012 quarter. GFKF consists of business investment plus residential building investment.

Graph, Gross fixed capital formation, quarterly change, March 2007 to March 2013.

Investment in residential building (up 9.6 percent), drove the GFKF rise this quarter. This is the seventh consecutive quarter of growth, and the largest increase in residential building investment since the September 2002 quarter, when it grew 12.7 percent. Value of Building Work Put in Place: March 2013 quarter reported a 12.0 percent increase in residential building activity, driven by Canterbury. 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, March 2007 to March 2013.

For the March 2013 year, residential building investment increased 19.2 percent.

Fall in business investment

Business investment in fixed assets, which is total GFKF excluding residential building, fell 2.2 percent in the March 2013 quarter, after an increase of 2.2 percent in the December 2012 quarter. Investment in plant, machinery, and equipment (down 6.2 percent) was the largest contributor to the fall, following a 6.9 percent increase in the December 2012 quarter. Investment in plant, machinery, and equipment consists of the domestic production, net imports, and net change in inventories of these types of goods. Imports of machinery and plant were up in the March 2013 quarter. Some of these imports were held as distribution inventories rather than being used for investment in plant, machinery and equipment.

Graph, Gross fixed capital formation – plant,machinery, and equipment, quarterly change, March 2007 to March 2013.

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

  • intangible fixed assets (down 2.9 percent)
  • other construction (down 2.8 percent)
  • transport equipment (down 3.8 percent).

Non-residential building was up 0.4 percent.

Investment in fixed assets up for the year

For the March 2013 year, GFKF increased 6.7 percent and business investment increased 3.7 percent compared with the March 2012 year.

Build-up in inventories

In the March 2013 quarter, the supply of goods produced exceeded demand leading to a $340 million build-up in inventories, following a rundown of $78 million in the December 2012 quarter. The rise this quarter was driven by increases in manufacturing, and forestry and logging. Partly offsetting this build-up were rundowns in distribution and agriculture inventories.

Government final consumption expenditure down

General government final consumption expenditure decreased 0.2 percent in the March 2013 quarter, after a decrease of 0.6 percent in the December 2012 quarter. In the latest quarter, central government expenditure was down 0.1 percent and local government was down 1.0 percent. The 2013 Census of Population and Dwellings, which took place in March, is included in central government expenditure.

Graph, General government expenditure, quarterly change, March 2007 to March 2013.

Annual general government expenditure up

For the March 2013 year, general government final consumption expenditure increased 0.6 percent.

Exports and imports both up

Export of goods and services up due to agricultural products

Export volumes of goods and services increased 2.5 percent in the March 2013 quarter, after a 1.4 percent increase in the December 2012 quarter.

The volume of goods exported increased 2.5 percent in the March 2013 quarter, after a 2.1 percent increase in the December 2012 quarter. The main drivers of the latest increase were:

  • agriculture and fishing primary products (up 15.5 percent), the largest increase since the March 2004 quarter when it was up 18.2 percent
  • dairy products (up 3.0 percent)
  • meat products (up 5.0 percent) with meat manufacturing also up due to increased slaughter numbers.

Partly offsetting the increase this quarter were decreases in:

  • coal, crude petroleum and ores, minerals, and gases (down 16.5 percent)
  • forestry primary products (down 4.7 percent) after volatile quarters in the last year. Forestry and logging production also fell in the March 2013 quarter as measured in the production measure of GDP.

Exports of services increased 7.0 percent in the March 2013 quarter, after a 2.9 percent fall in the December 2012 quarter. In the latest quarter, exports of travel services was up 7.1 percent.

Graph, Imports and exports of goods and services, quarterly, March 2007 to March 2013.

Import of goods and services up due to machinery and plant

Import volumes of goods and services increased 2.3 percent in the March 2013 quarter, after a 0.7 percent decrease in the December 2012 quarter.

The volume of goods imported increased 2.8 percent in the March 2013 quarter, after a 1.7 percent decrease in the December 2012 quarter. The main contributors to the increase were capital goods imported (up 3.6 percent), driven by machinery and plant (up 3.7 percent) and imports of intermediate goods (up 2.9 percent). Investment in plant, machinery, and equipment fell this quarter. Some of the additional imports were held in distribution inventories rather than being used for investment in plant, machinery and equipment.

The volume of services imported was up 2.2 percent in the March 2013 quarter, after a 0.8 percent increase in the December 2012 quarter. The latest rise was driven by imports of travel services (up 6.6 percent).

Export and import volumes both up for the year

For the March 2013 year, export volumes increased 3.4 percent, driven mainly by dairy products (up 16.4 percent). Over the same period, import volumes increased 0.5 percent, driven mainly by imports of machinery and plant (up 13.0 percent).

Implicit price deflators

The GDP implicit price deflator (IPD) for the March 2013 year decreased 0.4 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 1.0 percent for the March 2013 year. This provides a broad measure of the overall price change for final goods and services purchased in New Zealand.

The consumers price index (CPI) increased 0.9 percent for the year ended March 2013 (see Consumers Price Index: March 2013 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 (RGNDI) increased 1.0 percent for the March 2013 year, compared with an increase in GDP of 2.5 percent 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.

Graph, Gross domestic product and real gross national disposable income, annual change, March 2007 to March 2013.

The merchandise terms of trade index increased in the March 2013 quarter after decreasing in the previous six quarters (see Overseas Trade Indexes (Prices): March 2013 quarter (provisional)). The fall in the terms of trade for the March 2013 year resulted in lower annual RGNDI growth than GDP growth.

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

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