NZ GDP, June 2017 quarter review - Westpac

Analysts at Westpac noted NZ's quarterly change of 0.8% (last: 0.6%, Westpac f/c: 0.8%, mkt f/c: 0.8%).

Key Quotes:

• Annual change: 2.5% (last: 2.5%)
• Annual average change: 2.7% (last: 2.9%)

"New Zealand’s GDP increased by 0.8% in the June quarter, in line with the median market forecast. That marked a modest acceleration from the 0.6% growth in the March quarter (revised up from 0.5%).

The June quarter figures saw the expected big boost from tourist spending, with two major sporting events during the quarter – the World Masters Games and the Lions rugby tour. Retail spending was up 1.7%, and accommodation rose by 5.4%.

There was also an expected rebound in transport activity, up 3.5% in June after a 1.6% fall in March. The wildfires around Christchurch in February had disrupted rail activity in particular, but this effect has now unwound.

Manufacturing activity rose by 1.8%, largely driven by a 5.7% jump in food manufacturing. There was also a 4.1% rise in petroleum and chemical manufacturing, in contrast to our expectation of a fall.

Construction activity fell by 1.1%, on top of a 2.1% fall last quarter. Residential, non-residential and infrastructure work were all lower for the quarter.

The slowing housing market is having a direct impact on the GDP figures. Financial services fell 0.2% as lending growth slowed, and rental and real estate services rose by 0.8% - not seasonally adjusted, but this is relatively soft for a June quarter.

We expected the June quarter to mark the high point for growth this year, given the one-off boost from tourism and a rebound in agriculture and transport from previous weak quarters. In that light, a 0.8% quarterly rise is not that impressive (and even less so in per capita terms: a 0.3% rise, following a flat outturn in the March quarter). We recently revised our September quarter growth forecast down to 0.7%, and over the next year as a whole we expect GDP growth to fall significantly short of Treasury and RBNZ forecasts. 

There was no financial markets reaction to the data."