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Gross Domestic Product: March 2016 quarter
Embargoed until 10:45am  –  16 June 2016
Commentary

New Zealand economy grows 0.7 percent

Gross domestic product (GDP) was up 0.7 percent in the March 2016 quarter. This follows a 0.9 percent increase in the December 2015 quarter. Growth for the year ended March 2016 was 2.4 percent.

GDP per capita was up 0.1 percent in the March 2016 quarter, following a 0.3 percent increase in the December 2015 quarter. GDP per capita for the year ended March 2016 increased 0.5 percent.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

The main movements by industry were:

  • construction was up 4.9 percent, and all construction industries increased
  • health care and residential care was up 2.7 percent, due to increases in private and public health care
  • retail trade and accommodation was up 1.3 percent, due to food and beverage services; and furniture, electrical, and hardware retailing
  • business services was up 0.6 percent, due to computer system design and related services; and advertising, market research, and management services
  • transport, postal, and warehousing was up 1.5 percent, due to transport support services
  • financial and insurance services was up 0.9 percent, due to banking and financing
  • mining was down 3.3 percent, driven by lower oil and gas extraction and coal mining.

Expenditure on GDP up 0.5 percent

The expenditure method of GDP rose 0.5 percent in the March 2016 quarter, following a revised 0.8 percent increase in the December 2015 quarter.  See revisions section for more on the revised December 2015 quarter number.

Note: The expenditure and production measures of GDP are conceptually the same, but use different data sources, so can differ in practice. 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. 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 main movements in the expenditure measure of GDP this quarter were:

  • investment in fixed assets was up 2.4 percent, due to other construction, such as roading and telecommunications infrastructure; and residential building
  • exports of goods and services was down 1.0 percent, and imports of goods and services was up 0.2 percent
  • inventories built up $183 million, due to increases in manufacturing inventories
  • household consumption expenditure was up 0.4 percent, due to expenditure on services.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Continued growth in construction

Construction was a key driver of GDP growth this quarter, up 4.9 percent, the highest quarterly growth since March 2014. All construction industries grew this quarter, with construction trade services and heavy and civil engineering as the main drivers.

Value of Building Work Put in Place: March 2016 quarter reported growth in the total value of building activity across the North Island, with the value of residential building work in Auckland exceeding $1 billion for the first time in the March 2016 quarter.

Strength in construction industries also reflected greater investment in construction, a key driver for the increase in investment in fixed assets for the March 2016 quarter. Investment in residential building increased 4.2 percent, non-residential building increased 4.4 percent, and other construction increased 12 percent. Other construction, which covers investment in infrastructure, grew due to increased investment in roading and telecommunications.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Exports and agricultural products down

Exports of goods and services

Exports of goods and services decreased 1.0 percent in the March 2016 quarter. This was due to a decrease of 3.5 percent in exports of goods, partly offset by an increase of 2.7 percent in exports of services.

Decreases in dairy and meat exports were the main drivers of the decrease in exports of goods, with exports of dairy products falling 8.9 percent and exports of meat products falling 13 percent. Exports of coal, crude petroleum and ores, minerals and gases fell 39 percent, due to a drop in exports of crude oil.

Graph, Exports of goods by type, change from December 2015 quarter.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Agriculture production

Agriculture production decreased 0.1 percent in the March 2016 quarter. This flat result reflects a decrease in sheep and beef farming, offset by increased milk production.

The anticipated El Niño weather pattern was not as severe as expected. The normal seasonal fall in milk production was less pronounced than usual, resulting in seasonally adjusted volumes of milk produced increasing slightly. This is despite falling dairy prices. The associated increase in dairy manufacturing alongside the decline in dairy exports is reflected in a build-up of dairy inventories.

Concern for the El Niño weather pattern also led to early slaughter of livestock, especially for sheep, in the December 2015 quarter, with a flow-on effect of a seasonal decline in sheep and beef farming in the March 2016 quarter. This is reflected in an associated decline in both meat product manufacturing and exports, with inventories of meat products down overall.

Growth in household spending supports service industries

Household consumption expenditure

Household consumption expenditure increased 0.4 percent in the March 2016 quarter, following a 1.0 percent increase in the December 2015 quarter. The main movements this quarter were:

  • services rose 0.7 percent, due to spending on culture and recreation (including gambling).
  • durable goods rose 0.4 percent, due to spending on audio-visual equipment, and used motor vehicles.
  • non-durable goods rose 0.2 percent, due to spending on grocery food, petrol, and beverages.

Strong visitor arrivals saw tourist spending increase 4.9 percent in the March 2016 quarter, following a 0.9 percent decrease in the December 2015 quarter. This increase in household and tourist spending helped boost demand for related service industries.

Services

Service industries grew 0.8 percent in the March 2016 quarter, following a 0.8 percent growth in the December 2015 quarter.

Health care and residential care was the main driver of the growth in service industries, with activity increasing 2.7 percent – the highest quarterly growth since June 2005. Both public and private health care were up this quarter off the back of higher demand for services from a growing population.

Also significantly contributing to growth in service industries was a 1.3 percent increase in retail trade and accommodation, due to food and beverage services; and furniture, electrical, and hardware retailing.

Graph, Service industries, change from December 2015 quarter.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Investment in fixed assets up

Investment in fixed assets was up 2.4 percent in the March 2016 quarter, following a revised 2.2 percent decrease in the December 2015 quarter. The increase was primarily due to investment in other construction, and residential building.

Investment in transport equipment was down 17 percent, due to reduced investment in air transport equipment. The decrease follows a 12 percent decrease in the December 2015 quarter, and comes after a large increase of 29 percent in transport equipment in the September 2015 quarter. Current levels are still higher than for the June 2015 quarter.

Investment in intangible assets decreased 5.7 percent in the March 2016 quarter, due to a decrease in purchases of software.

Imports of capital goods decreased 10 percent, following a 7.8 percent decrease in the December 2015 quarter. This was primarily driven by a 42 percent decrease in transport equipment imports.

Note: Seasonally adjusted chain-volume series expressed in 2009/10 prices.

Real purchasing power of New Zealand's income up 2.2 percent

Real gross national disposable income (RGNDI), which measures the real purchasing power of New Zealand’s disposable income, was up 2.2 percent in the March 2016 quarter. This follows a revised 0.3 percent increase in the December 2015 quarter. RGNDI increased 2.0 percent for the March 2016 year, compared with an increase in GDP of 2.4 percent over the same period.

The terms of trade increased over the March 2016 quarter, causing faster growth in RGNDI compared with GDP. Overseas Trade Indexes (Prices and Volumes): March 2016 quarter (provisional) reported a 4.4 percent increase in the merchandise terms of trade, due to import prices for goods falling while export prices remained unchanged.

Terms of trade is the ratio of the price of exports to the price of imports. An improvement in the terms of trade means that fewer exports are needed to pay for a given volume of imports. This makes it possible for residents to purchase an increased volume of goods and services from the incomes generated by a given level of domestic production.

Note: Actual chain-volume series expressed in 2009/10 prices.

RGNDI per capita was up 1.6 percent in the March 2016 quarter, following a revised 0.2 percent decrease in the December 2015 quarter. Over the March 2016 year, RGNDI per capita increased 0.3 percent compared with the December 2015 year. This shows that New Zealand’s real purchasing power increased more than New Zealand’s population.

Graph, Real gross national disposable income per capita, quarterly and annual growth, March 2010 to March 2016.

See RGNDI for more about RGNDI.

New Zealand growth ahead of most of our trade partners

Percentage changes in GDP – international comparisons
Country

Quarterly percentage change in GDP

Change from same quarter previous year
New Zealand 0.7 2.8
Australia 1.1 3.1 
Canada  0.6 1.1
Euro area (19 countries) 0.6 1.7
Japan 0.5 0.0
OECD 0.4 1.8
United Kingdom 0.4 2.0
United States 0.2 2.0

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

See DataInfo+ for information on definitions and data quality.  These sections were previously included in this release.

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