MNI ANALYSIS: New Zealand Q4 GDP Supported by Services

--Household Consumption Growth Accelerates But Construction Slows

By Sophia Rodrigues

     SYDNEY (MNI) - New Zealand's real GDP grew slightly less than expected as

the unusually hot weather dragged the primary sector but this was mostly offset

by growth in the services sector. 

     A bright spot was growth in household consumption expenditure but

offsetting this was slowing in construction activity. The outcome is supportive

of the Reserve Bank of New Zealand's hold for longer monetary policy stance.

     Data published by Statistics New Zealand Thursday showed GDP rose 0.6% q/q

in Q4, the same pace as Q3 with the y/y pace staying at +2.9% for the second

straight quarter. The outcome was less than MNI median forecast for +0.7% q/q

and +3.1% y/y but was in line with the RBNZ's forecast for +0.6% q/q growth.

     Growth was mainly supported by services industries which rose 1.1% q/q,

marking a pace last seen in Q3 of 2016. Overall growth in the service industries

was led by a 2.3% increase in business services, particularly computer system

design and related services, and advertising, market research, and management

services. Other significant contributors included wholesale, retail, rental

hiring and real estate, and transport.

     Among the primary sectors, agricultural production fell 2.7% q/q. Overall

food manufacturing was down 0.1% as higher fruit product manufacturing and

higher meat manufacturing were offset by lower dairy and alcoholic beverage

manufacturing.

     Construction growth slowed in Q4, rising 0.7% after a strong 3.5% growth in

Q3. Construction activity was supported by rise in non-residential buildings

which rose 4.6% -- the best since Q1 of 2016. 

     Fixed asset investment rose 2.1% in Q4, faster than a revised 1.8% rise in

Q3.

     GDP per capita, slowed in Q4, up 0.1% q/q versus a 0.2% rise in Q3. In y/y

terms it rose just 0.7% -- the lowest rate since 2011 and was largely the result

of strong inward migration. 

     The data show household consumption growth accelerated to 1.2% q/q growth,

following a revised 1.0% rise in Q3, and marking the largest increase since Q1

of 2016. Significantly, household spending was driven by purchases of

non-durable goods which rose 1.9% q/q compared with a 0.3% rise in Q3.

     Household expenditure overseas fell 0.2% q/q after a 2.6% rise in Q3 and

non-resident expenditure in New Zealand declined 2.3% after a 1.7% drop in Q3.

     New Zealand fourth quarter gross domestic product data published by

Statistics New Zealand on Thursday:

                                  Q4 Q/Q (% Change)  Q4 Y/Y (% Change)

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

GDP                                            +0.6               +2.9

MNI median                                     +0.7               +3.1

RBNZ Forecast                                  +0.6

Main movements

Agriculture, forestry, fishing                 -3.2               +2.3

Mining                                         +1.8               -2.4

Manufacturing                                  -0.1               +2.0

Construction                                   +0.7               +1.2

Wholesale trade                                +2.2               +5.4

Retail trade/accommodation                     +1.6               +6.2

Professional, technical services               +2.3               +4.6

Financial, insurance services                  +0.7               +0.8

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

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