Economy expands by 0.6% as expected in December quarter; GDP only up 2.8% in year to December

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New Zealand’s economy expanded as expected in the last three months of 2018.

Gross domestic product (GDP) was up 0.6% in the December quarter and 2.8% in the year to December, according to Statistics New Zealand.

Annual growth was the slowest it’s been since 2014.

Quarterly growth undershot the Reserve Bank’s projection of 0.8%, but was on par with what the market was expecting.

It was also an improvement from the September quarter, which experienced growth of 0.3%.

The services sector drove the December quarter growth, expanding 0.9%, while the goods-producing sector rose marginally by 0.2%. This was offset by the primary sector, which fell 0.8% in the quarter.

Looking at GDP per capita, this increased 0.1%, following a 0.1% drop in the December quarter.

GDP per capita was up 0.9% in the December year, the lowest annual growth since 2011. Improving per capita GDP growth was something the Labour-led Government campaigned hard on.

Digging into some of the detail, nine of the 11 services industries recorded increases. The growth in the sector was led by a 2.5% increase in retail, trade and accommodation, and a 3.2% increase in transport, postal and warehousing services.

Household spending was up 1.3%.

Meanwhile agriculture, forestry and fishing production fell 0.6% in the December quarter. Agriculture led this decline, down 1.3%.

Low oil and gas activity, largely due to disruptions at the Pohokura gas field, saw mining sector activity drop 1.7%.

Construction was up 1.8%, driven by increases in non-residential buildings and construction services.

Manufacturing activity continued to fall, down 0.4%.

Investment spending in fixed assets was up 1.4%, while business investment rose 1.3%.

The New Zeland dollar jumped a little on the news. 

The Reserve Bank will review the Official Cash Rate on March 27.

Economic growth

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