MNI ANALYSIS: New Zealand Q3 GDP Supported by Construction

--Household Consumption Growth Slows in Q3

By Sophia Rodrigues

     SYDNEY (MNI) - New Zealand's real GDP grew in line with expectations in the

third quarter as construction rebounded after two quarters of decline, but the

outcome was below the Reserve Bank of New Zealand's forecast. 

     GDP rose 0.6% q/q, with the y/y pace accelerating to +2.7%, as an upward

revision to Q2 GDP created a higher base for the q/q gain, data published by

Statistics New Zealand on Thursday show. The q/q outcome was in line with MNI

median forecast but the y/y growth rate was above the MNI survey median for

+2.4%. The RBNZ had forecast a 0.7% q/q gain.

     Growth was mainly supported by construction activity, which rose 3.6% q/q

and made a solid 0.2-percentage-point contribution to GDP. This was the largest

quarterly growth since the March 2016 quarter. Expenditures on road and rail

projects drove growth in infrastructure, which experienced the strongest

increase since 2007. Residential construction also reported a strong increase.

     The rise in construction activity removes a significant downside risk to

the RBNZ's monetary policy but much still depends on how household consumption

behaves in the period ahead. The RBNZ's expectation is that growth in both

consumption and construction will remove excess capacity in the economy and lead

to a pickup in non-tradable inflation.

     The data show household consumption growth slowed to a 0.9% q/q gain in Q3

from a 1.1% rise in Q2. Significantly, Q3 consumption growth was driven by

imports of low-value goods, which rose 5.5% after a 0.9% fall the quarter

before. Durable goods purchases rose 2.3% while non-durable spending was flat.

     New Zealanders' spending on foreign goods and services increased 4.1%, due

in large part to the strongest quarterly growth in imports of services since

2010.

     Among other industries, agriculture declined slightly during the quarter,

with decreased milk production partly offset by increased activity in cattle and

sheep farming. Dairy product exports fell 5.2% but other manufacturing

industries like transport equipment, machinery and equipment recorded increases

during the quarter.

     Activity in accommodation, restaurants, and bars fell in Q3 while retail

trade increased, leading to an overall fall in the retail trade and

accommodation industry. The decline followed strong growth in the June 2017

quarter, which was boosted by the Masters Games and the Lions Tour. 

     On a per capita basis, GDP rose 0.2% q/q, slowing from 0.5% growth in Q2. 

     New Zealand third quarter gross domestic product data published by

Statistics New Zealand on Thursday:

                                  Q3 Q/Q (% Change)  Q3 Y/Y (% Change)

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

GDP                                            +0.6               +2.7

MNI median                                     +0.6               +2.4

RBNZ Forecast                                  +0.7

Main movements

Agriculture, forestry, fishing                 -0.1               +3.4

Mining                                         +3.2               +1.4

Manufacturing                                  +1.8               +2.6

Construction                                   +3.6               +1.9

Wholesale trade                                +0.6               +2.9

Retail trade/accommodation                     -0.4               +5.5

Professional, technical services               -0.3               +0.6

Financial, insurance services                  +0.7               +2.1

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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