All references to quarterly movements are to seasonally adjusted chain-volume series expressed in 1995/96 prices unless otherwise stated.
Economy contracts for fourth consecutive quarter
Economic activity declined 0.9 percent in the December 2008 quarter, following a 0.5 percent decrease in the September 2008 quarter. This is the fourth consecutive quarter of contraction in economic activity.
In the year ended December 2008, the economy grew 0.2 percent. Annual gross domestic product (GDP) for the year ended 2008 was higher than for the year ended December 2007, despite the four quarters of declining activity. This occurred because the rate of growth in 2007 was greater than the rate of contraction in 2008.
Activity in primary industries increased 1.6 percent in the latest quarter, with agriculture being the main contributor (up 4.0 percent). Dairy production was the main driver within the agriculture industry.
Activity in the goods producing industries was down 3.6 percent in the December 2008 quarter, with the main driver being manufacturing activity (down 3.8 percent). Eight of the nine manufacturing industries recorded decreases this quarter; only food, beverage and tobacco manufacturing increased. Construction activity also declined (down 4.4 percent).
Service industries were up 0.8 percent in the December 2008 quarter after recording negative growth in both the June and September 2008 quarters. Increases in finance, insurance and business services (up 2.2 percent), and government administration and defence (up 2.3 percent) were the main contributors. Partly offsetting the overall increase in service industries were wholesale trade (down 4.9 percent), and transport and communication (down 0.3 percent).
The expenditure-based measure of GDP, released concurrently with the production-based measure, recorded a 0.6 percent decrease in the December 2008 quarter.
Household consumption expenditure was flat in the December 2008 quarter, following three consecutive decreases in the volume of goods and services purchased by New Zealand households. In the December 2008 quarter, household expenditure on both durable and non-durable items decreased, down 1.4 percent and 0.2 percent, respectively. The decrease in durables was mainly driven by declines in used vehicles, furniture and appliances, while for non-durables the decrease was mainly due to reduced spending on food and beverages. Expenditure on services was up 0.5 percent for the quarter.
Gross fixed capital formation, which measures investment in fixed assets, was down 5.3 percent in the December 2008 quarter. Investment in residential building fell 14.0 percent this quarter, and for the year ended December 2008 it fell 18.6 percent. Business investment decreased 1.8 percent in the December 2008 quarter, mainly due to a 4.8 percent decline in plant machinery and equipment investment.
Total export volumes were down 3.3 percent in the December 2008 quarter, while total import volumes were down 6.1 percent. The largest contributors to the fall in import volumes were passenger motor cars (down 27.1 percent), and machinery and plant (down 6.1 percent).
Gross domestic product by industry
Primary industries
Primary industry activity increased 1.6 percent in the December 2008 quarter, following the 0.5 percent increase in the September 2008 quarter. Agriculture (up 4.0 percent) was the main driver of the increase in primary activity in the latest quarter. The rise in agriculture production was mainly driven by increased dairy production (milk fat).
For the year ended December 2008, activity in primary industries increased 0.9 percent, compared with a 3.6 percent increase for the year ended December 2007.
Goods producing industries
Activity in goods producing industries decreased 3.6 percent in the December 2008 quarter, the fourth consecutive quarterly decrease. All goods producing industries fell this quarter, with manufacturing the main contributor to the decrease.
Manufacturing activity declined 3.8 percent this quarter. Of the nine manufacturing industries, only food, beverage and tobacco manufacturing recorded an increase in the December 2008 quarter, (up 1.1 percent). Note that the measurement of manufacturing in GDP differs from the Quarterly Economic Survey of Manufacturing (QMS) in several respects. Conceptually, manufacturing in GDP measures the valued added of the industry, while the QMS measures sales. Also, the deriving of volumes uses different methods. The QMS deflates sales by prices to derive volume measures, while GDP uses direct volumes data in some cases.
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Construction activity declined 4.4 percent in the December 2008 quarter. This decline was driven by a fall in residential building and construction trade services, and is reflected in investment on the expenditure side. Partly offsetting the construction decline was non-building construction, which recorded an increase in activity in the latest quarter. Non-building construction includes construction work on bridges, communication networks, electrical transmission lines, and major repairs to roading and other infrastructure.
Value added in the electricity, gas and water industry declined by 1.0 percent in the December 2008 quarter. Lake levels returned to pre-drought levels in the September 2008 quarter, while demand for electricity dropped in the December 2008 quarter.
For the year ended December 2008, activity in goods producing industries decreased 3.1 percent.
Service industries
Service industry activity was up 0.8 percent in the December 2008 quarter, following two quarters of decline.
Finance, insurance and business services (up 2.2 percent) was the main contributor to the increase in service industries in the latest quarter, with a rise in a range of business services, as well as an increase in financial sector activity. Government administration and defence also increased in the December 2008 quarter (up 2.3 percent).
Offsetting these increases in services was a large decrease in wholesale trade (down 4.9 percent). Every category within wholesale trade declined in the December 2008 quarter. Metal and mineral wholesaling, and textile, clothing and footwear wholesaling were the main contributors to the decline.
For the year ended December 2008, service industries were up 1.7 percent, compared with 3.9 percent growth for the year ended December 2007.
Unallocated items
Unallocated items includes taxes, and items that are not allocated to any specific industry. These items are: the financial service charge, the seasonal adjustment balancing item, and taxes which are levied on the purchaser not the producer (such as GST and import duties). Unallocated taxes were down 15.1 percent in the December 2008 quarter, mainly due to an increase in the financial service charge. This is consistent with the increase in activity in the finance and insurance industry.
Expenditure on gross domestic product
Expenditure on GDP decreased 0.6 percent in the December 2008 quarter, following a 0.6 percent decrease in the September 2008 quarter. While the production- and expenditure-based measures are both official series, the production-based measure has historically shown less volatility and is the preferred measure for quarter-on-quarter changes.
Households
Household final consumption expenditure remained flat over the December 2008 quarter, following three consecutive quarterly decreases. Household consumption expenditure measures the volume of spending by New Zealand-resident households on goods and services. The Retail Trade Survey: December 2008 quarter recorded a 1.1 percent decrease in sales volumes. This survey is a major data source used for estimating movements in household final consumption expenditure.
Household expenditure on durables decreased 1.4 percent for the latest quarter, following a 0.4 percent increase in the September 2008 quarter. Decreased household spending on used vehicles, and retail furniture and major appliances were the main contributors to the fall in durables in the December 2008 quarter.
The volume of expenditure on non-durable items also decreased, down 0.2 percent in the December 2008 quarter. The decrease came mainly from reduced household spending on food and alcoholic beverages. This was partly offset by increased household expenditure on petrol, oil and grease, and other fuels.
Expenditure on services increased 0.5 percent in the December 2008 quarter, following a 0.4 percent decrease in the September 2008 quarter. The main driver of the increase in services in the latest quarter was domestic air travel.
Investment in new housing was down 14.0 percent in the December 2008 quarter, the fifth consecutive quarterly decrease. Residential building activity was down 13.8 percent, as reported in Value of Building Work Put in Place: December 2008 quarter . For the year ended December 2008, investment in residential building decreased 18.6 percent.
Business investment
Within gross fixed capital formation, business investment in fixed assets decreased 1.8 percent in the December 2008 quarter, following an 8.1 percent decrease in the September 2008 quarter. For the year ended December 2008, business investment in fixed assets increased 0.3 percent, compared with an increase of 4.9 percent for the year ended December 2007.
Investment in plant and machinery fell 4.8 percent in the latest quarter, following a 15.1 percent fall in the September 2008 quarter. About half of the September 2008 quarter decrease was due to one-off items imported in the June 2008 quarter. Imports of plant and machinery capital goods were down 6.1 percent in the December 2008 quarter, and domestic production of machinery and plant also decreased.
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A decrease in transport equipment investment (down 8.4 percent) was mainly due to a decline in the purchase of motor vehicles by businesses. Partly offsetting this decrease was increased investment in intangible assets (up 4.4 percent), and other construction (up 2.7 percent). Investment in non-residential building increased 0.8 in the December 2008 quarter. The Value of Building Work Put in Place: December 2008 quarter reported a 1.6 percent increase in non-residential building activity
Overall total inventories have run down $396 million in the December 2008 quarter, with a $464 million run-down in distribution inventories being the largest contributor. Agriculture and forestry inventories also declined in the quarter, while manufacturing inventories offset these with a build up of $189 million.
Government
General government final consumption expenditure increased 1.7 percent in the December 2008 quarter, and was up 4.0 percent for the year ended December 2008. Central government recorded a 1.8 percent increase in expenditure in the quarter, with increases in central government administration, health, and public order and safety spending the main contributors. Local government final consumption expenditure increased 1.1 percent in the December 2008 quarter.
Exports and imports
Export volumes decreased 3.3 percent in the December 2008 quarter, following a 3.1 percent decrease in the previous quarter. Export volumes for the year ended December 2008 were down 1.8 percent, compared with a 3.8 percent increase for the year ended December 2007.
The volume of goods exported decreased 1.9 percent in the December 2008 quarter. Lower export volumes of agriculture and fishing primary products (down 10.8 percent), wood and paper products (down 7.8 percent), and coal, crude petroleum and ores (down 15.5 percent) were the largest contributors to the decline. Exports of metal products, machinery and equipment increased 7.1 percent in the December 2008 quarter, while exports of dairy products (up 5.7 percent), and other food, beverages and tobacco (up 6.4 percent) also increased this quarter
Exports of services were down 6.1 percent in the December 2008 quarter. Exports of travel services, which measures the volume of spending by overseas visitors to New Zealand, decreased this quarter. Exports of transport services (down 14.0 percent), also declined.
Import volumes were down 6.1 percent in the December 2008 quarter. On an annual basis, import volumes increased 2.5 percent for the year ended December 2008, compared with the 8.6 percent increase in the year to December 2007. In the December 2008 quarter, goods import volumes decreased 6.5 percent while imports of services decreased 6.4 percent.
The largest decrease in import volumes has come from imports of passenger motor cars, which fell 27.1 percent in the December 2008 quarter. This fall is reflected in the decline in both household expenditure on vehicles, and investment in transport equipment this quarter. Imports of machinery and plant also fell in the latest quarter (down 6.1 percent), following a 16.7 percent fall in the previous quarter. Investment in plant machinery and equipment fell 4.8 percent in the December 2008 quarter. Imports of transport equipment rose 12.6 percent this quarter.
Imports of intermediate goods decreased 3.2 percent in the December 2008 quarter, which was consistent with declines in manufacturing activity. Imports of consumption goods decreased 3.4 percent this quarter, which was consistent with declines in household expenditure in recent quarters.
In the December 2008 quarter, imports of services decreased 6.4 percent, with the largest contributors being decreases in freight and travel services. The decline in freight was due to lower import volumes.
Real gross national disposable income
Real gross national disposable income (RGNDI) increased 1.9 percent for the year ended December 2008, while GDP increased 0.2 percent over the same period.
GDP is a measure of economic activity. RGNDI is a measure of the volumes of goods and services that New Zealand residents have command over. It takes into account changes in the terms of trade effect (the price of imports relative to the price of exports), and real gains from net investment and transfer income with the rest of the world.
The relatively higher growth in annual RGNDI when compared with GDP annual growth is a result of the strong terms of trade for the year to December 2008. While the terms of trade index decreased 0.9 percent in the December 2008 quarter, in the year to December 2008 it recorded a 10.4 percent increase.
Implicit price deflators
The GDP implicit price deflator (IPD) for the year ended December 2008 increased 3.6 percent. The GDP IPD is a broad measure of the overall price change for final goods and services produced in New Zealand.
The IPD for gross national expenditure was up 3.2 percent for the year ended December 2008. This provides a broad measure of the overall price change for final goods and services purchased in New Zealand (such as consumer and investment goods).
For technical information contact:
Annabel Montgomery or Anqi Tan
Wellington 04 931 4600
Email: info@stats.govt.nz
Next release ...
Gross Domestic Product: March 2009 quarter will be released on 26 June 2009.