Gross Domestic Product: September 2008 quarter

All references to quarterly movements are to seasonally adjusted chain-volume series expressed in 1995/96 prices unless otherwise stated.

Economic growth declines

Economic activity declined 0.4 percent in the September 2008 quarter, following a decrease of 0.2 percent in the June 2008 quarter. This is the third consecutive quarter of declining economic activity. In the year ended September 2008, the economy grew 1.7 percent, down from the 2.8 percent growth recorded in the year ended September 2007.

Activity in primary industries increased 2.1 percent this quarter, with agriculture the main contributor (up 6.0 percent). Dairy production and cattle processed for meat were the main drivers within the agriculture group.

Activity in goods producing industries was down 1.4 percent in the September 2008 quarter, driven by manufacturing activity (down 2.5 percent) and construction (down 1.2 percent). The largest decrease in manufacturing was in food, beverage and tobacco manufacturing. A 5.1 percent increase in electricity gas and water value-added partly offset these decreases.

Service industries recorded their second consecutive quarter of decline, down 0.2 percent for the September 2008 quarter. This is the first time since 1991 that there have been consecutive negative quarters in the service industries. Declines in transport and communication (down 1.4 percent), wholesale trade (down 1.8 percent) and retail, accommodation and restaurants (down 1.2 percent) drove this quarter's decrease. Increases in finance, insurance and business services (up 0.5 percent) and in government administration and defence (up 0.6 percent) partly offset the overall decrease in service industries.

The expenditure-based measure of Gross Domestic Product (GDP), released concurrently with the production-based measure, decreased 0.7 percent in the September 2008 quarter.

Household consumption expenditure fell 0.2 percent in the September 2008 quarter, the third consecutive fall in the volume of goods and services purchased by New Zealand households. Household consumption expenditure was down 0.5 percent and 0.2 percent in the March and June 2008 quarters, respectively. In the September 2008 quarter, household expenditure on services was down 0.5 percent and expenditure on non-durables was down 0.9 percent. The decrease in non-durables was mainly driven by food and beverages. Expenditure on durable items was up 0.5 percent for the quarter, mainly due to spending on retail furniture and major appliances (up 3.1 percent).

Imports of plant and machinery fell 18.0 percent in the September 2008 quarter, a reflection of lower investment in plant machinery and equipment for the quarter, down 15.6 percent. The decrease was due in part to the importing of large-value capital goods related to the oil industry in the June 2008 quarter. Overall business investment decreased 8.6 percent in the September 2008 quarter.

Total import volumes were down 7.6 percent in the September 2008 quarter. Total export volumes decreased over the same period, down 3.1 percent. The largest contributor was the 12.9 percent decrease in exports of agriculture and fishing primary products.

Gross domestic product by industry

Primary industries

Primary industry activity increased 2.1 percent in the September 2008 quarter, following the 0.3 percent decrease in the June 2008 quarter. Agriculture was the main driver of the increase in primary activity this quarter, up 6.0 percent. For the year ended September 2008, activity in primary industries increased 4.1 percent, compared with a 1.2 percent decrease for the year ended September 2007.

 

This quarter's increase in agriculture production was mainly driven by increased dairy production (milk fat) and cattle processed for meat. Conversions from beef and sheep farms to dairy farms are continuing and they contributed to the return of dairy production to pre-drought levels. The increase in agricultural production this quarter is also reflected in the increase in agricultural inventories.

Goods producing industries

Activity in goods-producing industries decreased 1.4 percent in the September 2008 quarter, the third consecutive quarterly decrease. The main contributor to this quarter's fall was manufacturing, down 2.5 percent. Eight of the nine manufacturing industries decreased this quarter with food, beverage and tobacco manufacturing the largest contributor (down 2.3 percent). Only machinery and equipment manufacturing recorded an increase in the September quarter, up 2.5 percent, mainly driven by transport equipment manufacturing.

Construction activity also declined in the September 2008 quarter, down 1.2 percent. This decrease was driven by a fall in residential building and construction trade services. These decreases were partly offset by non-residential building, which recorded an increase in activity this quarter.

Electricity, gas and water offset some of the decline in goods producing industries this quarter, with an increase of 5.1 percent. An increase in electricity value added was mainly due to the end of the drought, with higher lake levels allowing more hydro electricity production this quarter. Hydro electricity production has a higher value added than thermal electricity production. In addition, a new geothermal plant began producing power in the September 2008 quarter.

For the year ended September 2008, activity in goods-producing industries decreased 0.4 percent.

Services industries

Service industry activity was down 0.2 percent in the September 2008 quarter, following a 0.4 percent decrease in the June 2008 quarter. This is the first time since 1991 that there have been consecutive quarters of decline in the services industries.

Transport and communications was the largest contributor to the decrease this quarter, down 1.4 percent. Within this grouping, communication services contributed the most, falling 1.8 percent. Transport and storage services activity also fell, down 1.1 percent.

Other falls came from wholesale trade, down 1.8 percent, driven by a fall in motor vehicle wholesaling. Retail, accommodation and restaurants fell 1.3 percent, with motor vehicle retailing and services the main driver.

For the year ended September 2008, service industries were up 2.4 percent compared with growth of 3.9 percent in the year to September 2007.

Expenditure on Gross Domestic Product

Expenditure on GDP decreased 0.7 percent 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 series for quarter-on-quarter changes.

Households

Household final consumption expenditure decreased 0.2 percent in the September 2008 quarter, the third consecutive decline. Household consumption expenditure fell 0.5 percent in the March 2008 quarter and 0.2 percent in the June 2008 quarter. Household consumption expenditure measures the volume of spending by New Zealand resident households on goods and services. The Retail Trade Survey: September 2008 quarter recorded a 0.9 percent decrease in sales volumes.

Household expenditure on durables increased 0.5 percent in the latest quarter, following a 0.1 percent increase in the June 2008 quarter. An increase in household spending on retail furniture and major appliances was the main contributor to the rise in durables.

The volume of expenditure on non-durable items was down 0.9 percent in the September 2008 quarter, mostly coming from reduced household spending on food and beverages. Spending on food and beverages decreased 1.1 percent.

Expenditure on services decreased 0.5 percent in the September 2008 quarter, following a 0.8 percent increase in the June 2008 quarter. Recreation admission charges contributed the most to the latest decrease, down 5.4 percent. Expenditure on tourist accommodation and domestic air travel also decreased, down 4.9 percent and 3.6 percent, respectively.

Investment in new housing was down 7.7 percent in the September 2008 quarter, following decreases of 5.2 percent and 8.2 percent in the March and June 2008 quarters, respectively. Residential building activity was down 7.9 percent as reported in the Value of Building Work Put in Place: September 2008 quarter release. For the year ended September 2008, investment in residential building decreased 9.7 percent.

Business investment

Business investment in fixed assets decreased 8.6 percent in the September 2008 quarter, following an increase of 4.0 percent in the June 2008 quarter. For the year ended September 2008, business investment in fixed assets rose 3.1 percent compared with an increase of 3.2 percent for the year ended September 2007.

Investment in plant and machinery fell 15.6 percent in the September 2008 quarter, following a 10.3 percent increase in the June 2008 quarter. Imports of plant and machinery capital goods were down 18.0 percent in the latest quarter, partly due to some one-off items related to the oil industry that were imported in the June 2008 quarter.

Investment in transport equipment also decreased in the September 2008 quarter, down 18.2 percent. Offsetting these decreases were increases in investment of non-residential buildings and intangible assets, which includes investment in software and mineral exploration. Non-residential building activity was up 5.8 percent as reported in the Value of Building Work Put in Place: September 2008 quarter release.

In the September 2008 quarter, manufacturing inventories provided the largest contribution to the increase in inventories, with a build up of $308 million. While manufacturing inventories increased, activity in the manufacturing industry declined 2.5 percent. Agriculture and forestry inventories also increased in the latest quarter, while distribution reported a run down in inventories. Overall total inventories have built up $246 million in the September 2008 quarter.

Government

General government final consumption expenditure increased 1.0 percent in the September 2008 quarter, and was up 4.0 percent for the year ended September 2008. Central government recorded an increase in expenditure of 0.9 percent in the quarter, with increases in health, and public order and safety spending the main contributors. Local government final consumption expenditure increased 2.3 percent in the September 2008 quarter.

Exports and imports

Export volumes decreased 3.1 percent in the September 2008 quarter, following a 0.3 percent decrease in the previous quarter. Export volumes for the year ended September 2008 were up 2.4 percent – an identical increase to that of the year ended September 2007.

The volume of goods exported decreased 2.6 percent in the September 2008 quarter. Decreased export volumes of agriculture and fishing primary products (down 12.9 percent), dairy products (down 5.0 percent) and other food, beverages and tobacco (down 7.0 percent) were the largest contributors to the decline. The only export groups to increase in the September 2008 quarter were forestry products (up 20.7 percent) and wood and paper products (up 2.1 percent).

Exports of services were down 3.4 percent in the September 2008 quarter. Exports of travel services decreased 6.3 percent this quarter, following an increase of 2.0 percent in the previous quarter. Miscellaneous service exports also decreased in the latest quarter, down 5.7 percent. This category covers services such as merchanting, accounting and consulting.

Import volumes were down 7.6 percent in the September 2008 quarter. On an annual basis, import volumes were up 7.5 percent in the year to September 2008, compared with an increase of 5.3 percent in the year to September 2007. Merchandise import volumes decreased 6.6 percent while imports of services decreased 7.3 percent in the September 2008 quarter.

Imports of capital equipment were down 25.6 percent in the September 2008 quarter. Imports of machinery and plant decreased this quarter, down 18.0 percent, following an increase of 22.0 percent in the June 2008 quarter. Investment in plant machinery and equipment decreased 15.6 percent over the same period. The large movements are partly due to the importing of large one-off items related to the oil industry in the June 2008 quarter. Imported volumes of transport equipment also decreased in the September 2008 quarter, down 34.7 percent.

Imports of consumption goods decreased 4.1 percent in the September 2008 quarter and imports of intermediate goods decreased 2.9 percent.

Imports of services decreased 7.3 percent in the September 2008 quarter, mostly due to decreases in miscellaneous services. The Balance of Payments and International Investment Position: September 2008 quarter release reported that imports of services relating to oil exploration and production decreased in the quarter. Imports of travel services decreased 4.9 percent in the September 2008 quarter.

Real gross national disposable income

Real Gross National Disposable Income (RGNDI) increased 4.4 percent for the year ended September 2008, while GDP increased 1.7 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 a strong growth in terms of trade in the first two quarters of the year to September 2008. While the merchandise terms of trade index decreased 2.3 percent in the September 2008 quarter, it increased 4.4 percent in the year to September 2008.

Implicit price deflators

The GDP implicit price deflator (IPD) for the year ended September 2008 increased 4.7 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 3.1 percent for the year ended September 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).

Revisions this quarter:

Production measure

• Since the June 2008 quarter release, the construction, property and business services, and central and local government administration industries have been revised due to the incorporation of annual data released in National Accounts: Year ended March 2008 on 13 November 2008. The Forestry and logging industry has been revised for the June 2008 quarter, due to updated roundwood removals data sourced from the Ministry of Agriculture and Forestry.
• Updated information from the Wholesale Trade Survey has flowed through to the wholesale trade series for quarterly GDP.
• GST has been revised, due to updated estimates of household consumption expenditure.
• Transport and finance and insurance services have been revised due to updated source data.
• Agriculture value added for the June 2008 quarter has been revised due to updated source data. Agriculture revised in the quarter from a slight negative movement to a slight positive movement. Overall activity in agriculture for the June 2008 quarter remains flat.

Expenditure measure

• Since the June 2008 quarter release, private household consumption expenditure, gross fixed capital formation, change in inventories, and general government final consumption expenditure have been revised due to the incorporation of annual current price expenditure data released in National Accounts: Year ended March 2008 on 13 November 2008.
• Revisions have been made to historical production and expenditure general government as a result of further confirmation of the Government Income and Outlay Accounts against the National Accounts (1987–2007)
• The June 2008 quarter forestry inventory change has been revised, due to updated roundwood removals data sourced from the Ministry of Agriculture and Forestry.
• Exports and imports data have been revised, due to previously provisional June 2008 quarter data becoming final and Balance of Payments revisions flowing through, as released in Balance of Payments and International Investment Position: September 2008 quarter on 22 December 2008.
• All components have been revised as a result of the updating of annual chain-linking weights in the September 2008 quarter.
• The annual current price manufacturing change in inventories for the year ended March 2007 has been revised since the release of the National Accounts: Year ended March 2008 on 13 November 2008. This revision was a result of new source data being incorporated into the annual measure.

 

For technical information contact:
Annabel Montgomery or Anqi Tan
Wellington 04 931 4600
Email: info@stats.govt.nz