Consumers in the passenger seat

New Zealand’s economic performance over 2013 leaves it well positioned to achieve around 4% economic growth over 2014. That would be the fastest growth the economy has seen since 2004. Unlike in the mid-2000s, though, this economic growth won’t depend on a consumer borrowing and spending spree.

Last week’s GDP report confirmed that the New Zealand economy gathered a good head of steam at the end of last year. GDP grew 0.9% in the December quarter – slower than the 1.2% growth seen in the September quarter, but a fairer reflection of the economy’s underlying trend. Whereas growth in the September quarter was boosted by a postdrought recovery in agricultural production, a broad range of sectors and industries shared the love this time.

As expected, the largest contributions came from manufacturing – including a 6.2% rise in machinery and equipment manufacturing – and wholesale trade (probably best thought of as a proxy for general economic activity than a driver of growth in itself). Other notable contributions included a 1.3% rise in finance and insurance, a 1.1% rise in retail trade, a 1.0% rise in transport and warehousing, and a 1.3% rise in healthcare and social assistance.

There were a few lumps and bumps, but nothing to raise any alarm. As heralded by earlier building work data, the construction sector had a second slow quarter, rising just 0.4%. That may seem odd given the prominence of the Christchurch rebuild, but it comes after a 29% lift in the two years following the February 2011 earthquake, and recent building consent issuance suggests there is a substantial amount of work still in the pipeline. Meanwhile agricultural output eased by a modest 1.6% following its massive rebound of 13.3% in September (revised down from 17% but still the biggest quarterly increase on record).