GDP steams ahead

JAMES WEIR
Last updated 11:00 20/03/2014

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The economy steamed in the December quarter, boosted by strong growth in manufacturing and wholesale trade improvements.

The ahead 0.9 per cent quarterly growth was in line with most economists' forecasts, but September quarter growth was revised down slightly.

The economy was in a "fairly steady growth phase" Westpac Bank economists said.

"We are in a pervasive upswing owing to the Canterbury rebuild, construction in Auckland, consumer buoyancy following house -price increases and a four-decade high in the terms of trade," Westpac chief economist Dominick Stephens said.

As interest rates rose, the housing market was expected to slow and consumer buoyancy would diminish and eventually economic growth would slow, he said

But agricultural production fell in the December quarter, after the huge post-drought recovery earlier in 2013. Construction was also slightly weaker in the quarter. But manufacturing had a "very strong" quarter for both food and non-food products, Westpac said

The New Zealand dollar was down about US1 cent overnight, after the US Federal Reserve announced its massive monthly bond-buying stimulus, would be trimmed to $55 billion from $65b.

Shortly after the latest quarterly New Zealand GDP figures were announced, the kiwi was about US85.4c, dipping slightly after Statistics NZ revised down September quarter growth from 1.4 per cent as earlier reported to 1.2 per cent as reported today.

The annual growth in the economy was 2.7 per cent in the 2013 year.

Statistics New Zealand said today that manufacturing activity grew 2.1 per cent, driven by increases in food, beverage, and tobacco, and machinery and equipment. Manufacturing activity is now at its highest level since March 2006.

Dairy farming and dairy product manufacturing both fell this quarter, after strong increases last quarter, when production rebounded from the drought earlier in 2013.

"While dairy activity fell this quarter, exports were up strongly, as production from last quarter was sold overseas," Statistics NZ national accounts manager Michele Lloyd said.

Wholesale trade, including machinery and equipment wholesaling, increased 3.2 per cent in the quarter.

Strong sales of machinery and equipment also led to a 7.5 per cent increase in investment in these goods. Investment in plant, machinery, and equipment is now at its highest level since the series began.

The volume of spending by New Zealand households in the December 2013 year grew 3.4 per cent, driven by a 7.4 per cent increase in spending on durable goods. This is the largest annual increase in spending on durable goods since June 2005.

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Predictions this week suggested the economy would keep growing strongly, boosted by construction and exports, with the average forecast of 3.6 per cent growth in the year to March 2015.

NZIER's latest consensus forecasts compiled from a survey of financial and economic agencies predict growth will pick up after growing 2.9 per cent in the year to March 2014.

- Fairfax Media

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