MNI ANALYSIS: New Zealand Q1 GDP Slows, H'hold Spending Flat

By Sophia Rodrigues

     SYDNEY (MNI) - New Zealand's GDP growth slowed in the first quarter mainly

due to fall in construction but a key disappointment in the data was flat growth

in household consumption that could have an impact on the Reserve Bank's

monetary policy outlook.

     Data published by Statistics New Zealand Thursday showed GDP rose 0.5% q/q

in Q1, in line with MNI median forecast but fell short of the RBNZ's forecast

for 0.7% growth and compared with 0.6% growth in Q4. This was the second

consecutive quarter that GDP grew less than forecast by the RBNZ.

     On a y/y basis, GDP rose 2.7%, in line with MNI median forecast.

     The main contributor to growth was manufacturing and services industries

while the key drag came from construction. Construction fell for residential and

non-residential, and also infrastructure.

     Overall growth in the service industries was driven by a 1.0% increase in

business services. Information media and telecommunication services also

contributed, up 2.3% in Q1, the largest increase in this industry since the June

2015 quarter.

     On an expenditure basis, GDP rose 0.3% q/q in Q1, slowing from 0.4% growth

in Q4. In y/y terms GDP grew 3.0% versus 3.2% in Q4.

     Household consumption was flat q/q, with y/y growth at 2.9%. This marks a

sharp slowing from 4.2% y/y growth in Q4. Part of this slowing may be temporary

due to decline in spending on used cars which was likely the result of reduced

availability of cars after stink bugs were detected in car shipments. 

     Still, trends in household spending need to watched closely because not

only was the slowing more than expected by the RBNZ, they also said risk to

household spending was to the upside.

     Investment in fixed assets was up 0.7% in Q1, slowing sharply from a 2.3%

increase in Q4. Investment in fixed assets grew 3.9% for the year ended March

2018.

     Increased investment was driven by a 2.1% rise in plant, machinery and

equipment, which saw strong annual growth of 13% for the March 2018 year. This

increase was offset by falls in investment in residential, non-residential, and

other construction. Other construction decreased 4.9%, following increases of

9.1% in Q3 last year and 1.1% in Q4. 

     GDP per capita was flat in Q1, compared with a 0.1% increase in Q4. In y/y

terms it rose just 0.6% and was largely caused by continued solid inward

migration. 

     New Zealand first quarter gross domestic product data published by

Statistics New Zealand on Thursday:

                                        Q1 Q/Q (% Change)  Q1 Y/Y (% Change)

----------------------------------------------------------------------------

GDP                                                  +0.5               +2.7

MNI median                                           +0.5               +2.7

RBNZ Forecast                                        +0.6

Main movements

Agriculture, forestry, fishing                       +0.8               +2.1

Mining                                               -0.2               -0.2

Manufacturing                                        +0.7               +2.1

Construction                                         -1.0               +2.4

Wholesale trade                                      +0.2               +4.2

Retail trade/accommodation                           +0.3               +4.4

Information, media, telecommunications               +2.3               +4.7

Professional, technical services                     +1.0               +5.3

Financial, insurance services                        +0.1               +1.0

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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