Stats NZ says GDP surged 1% in the June quarter against expectations of 0.8% rise; biggest increase in two years; the size of the rise means interest rate cuts may well now be off the table

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GDP growth in the June quarter was a surprising 1%, which was well ahead of the market consensus pick of 0.8% and was the biggest quarterly rise in two years.

The magnitude of the increase means that the possibility of interest rate cuts – that had been brought up by the Reserve Bank – has likely been taken off the table.

The New Zealand dollar quickly gained from US66c before the news came out to about US66.4c.

Stats NZ said GDP per capita was up 0.5 percent in the June 2018 quarter, following a flat quarter in March.

Annual GDP growth for the year ended June 2018 was 2.7 percent.

The size of the economy in current prices was $289 billion.

Growth was broad-based, with 15 of 16 industries recording higher production. Mining was the only industry to decline, reflecting one-off factors.

“Once again service industries led growth. Goods-producing and primary industries also saw rises this quarter,” national accounts senior manager Susan Hollows said.

The largest contribution to growth came from agriculture, up 4.2 percent.

Growth of 1.0 percent in the service industries was broad-based, with all industries recording a lift.  

“The real strength of services this quarter lay in a consistent performance across a range of industries,” Mrs Hollows explained.

Retail trade and accommodation, wholesale, and transport industries all rose, reflecting higher household spending.

Within primary industries, agriculture’s strong performance was supported by growth in forestry. A 20 percent fall in mining – its largest fall in 29 years – provided a strong offset.

“Quarterly growth in agriculture was the strongest since September 2014, with the dairy season ending well after earlier weather disruptions,” Mrs Hollows said. “An unplanned shutdown stalled gas production, which led to the fall in mining as well as some offset to manufacturing activity.”

Manufacturing was further affected by lower petroleum and chemical product manufacturing following a planned shutdown at Marsden Point refinery.

Growth in electricity generation was the largest in nine years, with wet and cold weather likely to have influenced both production and demand.

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