All references to quarterly movements are to seasonally adjusted chain-volume series expressed in 1995/96 prices unless otherwise stated.
Economic growth declines 0.3 percent
Economic activity decreased 0.3 percent in the March 2008 quarter, following an increase of 0.8 percent in the December 2007 quarter. In the year ended March 2008, the economy grew 3.0 percent, up from the 1.6 percent growth recorded in the year ended March 2007.
Primary industries recorded their largest quarterly decline since March 1998, down 4.1 percent in the March 2008 quarter. Agriculture was the main contributor to the decrease, down 5.6 percent for the quarter. The drought experienced in parts of the country contributed to the decline through lower output and and increased production costs (intermediate consumption) this quarter.
Declines in both construction and manufacturing (down 5.2 percent and 1.2 percent, respectively) drove a 1.9 percent fall in goods producing industries for the quarter. This is the largest decline for goods producing industries since June 2000. Partly offsetting the decline were petroleum, chemical, plastic and rubber manufacturing and wood and paper product manufacturing, up 7.9 percent and 2.6 percent, respectively.
The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a 0.6 percent decrease in the March 2008 quarter.
Household consumption expenditure fell 0.4 percent in the March 2008 quarter, the first decrease since the June 2004 quarter. Expenditure on durable items was down 3.4 percent for the quarter, with reductions in spending on vehicles and furniture and major appliances the largest contributors to the decrease. Spending on non-durables remained unchanged from the December 2007 quarter, while spending on services increased 0.4 percent.
Gross fixed capital formation decreased 2.0 percent in the March 2008 quarter, mostly driven by contractions in investment in both residential and non-residential building, which recorded decreases of 5.5 percent and 7.2 percent, respectively.
Gross domestic product by industry
Primary industries
Activity in primary industries fell 4.1 percent in the March 2008 quarter, following an increase of 3.2 percent in the previous quarter. For the year ended March 2008, activity in primary industries increased 4.5 percent.
The largest driver of the decrease in primary industry activity this quarter was agriculture, down 5.6 percent. This is the largest quarterly decrease in agriculture since the 5.7 percent decrease in March 1998. Drought conditions experienced in parts of the country resulted in reduced output and increased production costs (intermediate consumption), which contributed to the lower value added for the industry.
Forestry and logging (down 2.7 percent) and mining (down 2.3 percent) were also weaker this quarter.
Goods producing industries
Activity in goods producing industries decreased 1.9 percent in the March 2008 quarter. The biggest contributors to this quarter's fall were construction and manufacturing, down 5.2 percent and 1.2 percent, respectively. For the year ended March 2008, activity in goods producing industries increased 0.5 percent.
Residential building, non-residential building and construction trade services all contributed to the 5.2 percent decrease in construction activity this quarter. For the year ended March 2008, activity in construction increased 2.2 percent. The Value of Building Work Put in Place: March 2008 quarter release provides a more detailed account of activity in the construction industry for the quarter.
The 1.2 percent decrease in manufacturing in the March 2008 quarter was mainly driven by food, beverage and tobacco manufacturing (down 4.0 percent) and machinery and equipment manufacturing (down 3.1 percent). Both of these industries are coming off strong results in the December 2007 quarter. Petroleum, chemical, plastic and rubber product manufacturing and wood and paper product manufacturing partly offset this quarter's decline, with rises of 7.9 percent and 2.6 percent, respectively.
Services industries
Activity in service industries was up 0.3 percent in the March 2008 quarter, following a 0.9 percent increase in the previous quarter. For the year ended March 2008, service industries were up 3.9 percent. Service industries make up the most significant proportion of GDP.
Personal and community services provided the most significant contribution to growth this quarter, up 1.4 percent. Also increasing this quarter were Government administration and defence (up 1.6 percent) and transport and communications (up 0.5 percent).
Finance, insurance and business services decreased 0.2 percent in the March 2008 quarter – the first decline for the industry since June 2000. This decrease is more notable as finance, insurance and business services had consistently been at, or above, 1.0 percent growth per quarter since the June 2006 quarter. This decrease was driven by both property services and business services, while finance and insurance services rose this quarter.
Expenditure on gross domestic product
Households
Household final consumption expenditure decreased 0.4 percent in the March 2008 quarter, following a 0.5 percent increase in the previous quarter. This is the first decline in household consumption expenditure since the June 2004 quarter. Household consumption expenditure measures the expenditure by New Zealand resident households. The Retail Trade Survey: March 2008 quarter recorded a 1.2 percent decrease in sales volumes. This is an important data source used for estimating movements in household final consumption expenditure.
Household expenditure on durables decreased 3.4 percent for the quarter. The drop in expenditure on durables for the March 2008 quarter follows increases of 1.3 percent in December 2007 and 1.0 percent in September 2007. A reduction in household spending on vehicles and furniture and major appliances have been the main contributor to the fall in durables this quarter.
Expenditure on services increased 0.4 percent in the March 2008 quarter, following a 0.3 percent increase in the December 2007 quarter. Expenditure on non-durable items remained unchanged from the December 2007 volume.
Investment in new housing was down 5.5 percent in the March 2008 quarter, following a 2.2 percent decrease in the previous quarter. Residential building activity was down 6.6 percent, as reported in the Value of Building Work Put in Place: March 2008 quarter release. In annual terms investment in residential buildings is up 3.7 percent for the year ended March 2008, compared with a 2.7 percent decrease for the year ended March 2007.
Business investment
Business investment in fixed assets decreased 1.2 percent in the March 2008 quarter, following an increase of 5.1 percent in the December 2007 quarter. For the year ended March 2008, business investment in fixed assets rose 4.4 percent, compared with a decrease of 1.6 percent for the year ended March 2007.
The main contributors to the decline in investment in fixed assets this quarter were investment in non-residential buildings (down 7.2 percent), and investment in intangibles (down 5.3 percent). The Value of Building Work Put in Place: March 2008 quarter release reported a 5.9 percent contraction in non-residential building activity. A reduction in exploration activity was the main driver for the decrease in investment in intangibles this quarter.
Offsetting these decreases was a 5.9 percent increase in investment in plant, machinery and equipment. This increase was sourced from strong imports, as domestic production decreased in the quarter. In the March 2008 quarter, imports of plant, machinery and equipment were up 8.8 percent, while manufacturing of machinery and equipment decreased 3.1 percent. For the year ended March 2008, investment in plant, machinery and equipment has increased 8.3 percent.
In the March 2008 quarter, inventories were built up by $350 million, following a $73 million build up of inventories in the December 2007 quarter. The increase in inventories this quarter was driven mainly by distribution industries (retail and wholesale trade). There were small rundowns in both agriculture and manufacturing inventories.
Government
General government final consumption expenditure increased 1.1 percent in the March 2008 quarter. Both central and local government recorded increases in expenditure in the quarter, up 1.1 percent and 1.3 percent, respectively. For the year ended March 2008, general government final consumption expenditure increased 4.2 percent.
Exports and imports
Export volumes decreased 1.8 percent in the March 2008 quarter, following a 4.5 percent increase in the previous quarter. Export volumes for the year ended March 2008 were up 2.3 percent, compared with an increase of 3.1 percent for the year ended March 2007.
Merchandise export volumes in the March 2008 quarter decreased by 1.5 percent, mainly as a result of decreased volumes of dairy and other food, beverages and tobacco product exports. Dairy product exports decreased 3.8 percent, down from the strong exports volumes recorded in the September and December 2007 quarters. Manufacturing of food, beverage and tobacco products decreased 4.0 percent in the March 2008 quarter. Offsetting these reductions were increased export volumes of agriculture and fishing primary products (up 5.1 percent) and meat products (up 3.6 percent).
Exports of services were down 1.2 percent in the March 2008 quarter. The main contributor to the decrease in exports of services this quarter was travel exports, down 0.8 percent. Travel exports measures the expenditure of overseas tourists in New Zealand after accounting for price effects.
Import volumes were up 1.2 percent in the March 2008 quarter. Imports volumes have been increasing since the September 2006 quarter. Merchandise import volumes increased 1.9 percent, while imports of services decreased 0.2 percent this quarter.
Imports of machinery and plant were strong in the March 2008 quarter, up 8.8 percent, and are reflected in the 5.9 percent increase in investment in plant machinery and equipment. The overall increase in imports of capital equipment in the March 2008 quarter was 2.6 percent. Imports of intermediate goods also rose this quarter, up 4.6 percent. For the year ended March 2008, imports of plant machinery and equipment increased 16.2 percent.
A 12.2 percent decline in imports of passenger motor cars has partly offset these increases, and is consistent with the drop in household consumption expenditure on vehicles. Imports of consumption goods also decreased, down 1.2 percent in the March 2008 quarter.
Real gross national disposable income
Real gross national disposable income (RGNDI) increased by 5.3 percent for the year ended March 2008, while GDP increased by 3.0 percent over the corresponding 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 a strong terms of trade. The annual terms of trade index recorded 11.3 percent growth in the year to March 2008, up from the 4.5 percent increase in the year to March 2007.
Implicit price deflators
The GDP implicit price deflator (IPD) for the year ended March 2008 increased 4.9 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 (GNE) was up 2.2 percent for the year ended March 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).
Expenditure-based measure
Expenditure on GDP decreased 0.6 percent in the March 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 series for quarter-on-quarter changes.
Revisions
Production measure:
- Agriculture value added has been revised, due to updated annual intermediate consumption data. Updated data sourced from the Ministry of Agriculture and Forestry and from Agriculture Production Statistics have also resulted in some revisions.
- Primary food manufacturing, communications, mining, wholesale trade and finance have been revised due to updated source data.
- Revisions to construction, owner-occupied dwellings and GST are a result of the expenditure measure incorporation of annual current price expenditure data.
Expenditure measure:
- All components (except for exports and imports) of the expenditure-measure of GDP have been revised due to the incorporation of annual benchmarks, as released in National Accounts (revised): Year ended March 2007 on 1 April 2008.
- A timing adjustment was made to exports of goods in the December 2007 quarter, due to new information on goods exported on consignment. These adjustments were made to reflect the change of ownership principle.
The December 2007 quarter estimates for change in inventories and investment in intangibles have revised due to improved source data.
- Household consumption expenditure has been revised due to implementation of improved methodology for calculating chain-volume measures, as part of the quarterly quality improvement programme (see the Technical notes for more information on this programme of work).
For technical information contact:
Annabel Montgomery or Emma Coll
Wellington 04 931 4600
Email: info@stats.govt.nz
Next release ...
Gross Domestic Product: June 2008 quarter will be released on 26 September 2008