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Service industries elevate GDP growth

coffee, cafe, serviceThe New Zealand economy grew 0.9 per cent in the September 2015 quarter, following an increase of 0.3 per cent in June, Statistics New Zealand said today. That was ahead of the 0.8 per cent growth predicted in a Reuters poll of economists, and the Reserve Bank’s forecast for expansion of 0.6 per cent. GDP grew 2.3 percent from the same quarter a year earlier, meeting expectations.

The September quarter increase was driven by growth in the service industries and manufacturing.

“The increase this quarter follows lower growth earlier in the year, which has brought the annual growth down to 2.9 per cent,” national accounts manager, Gary Dunnet, said.

The service industries collectively grew 0.9 per cent in the quarter, driven by increases in business services, retail trade and accommodation, and transport services.

“The service industries were fuelled by greater domestic demand and spending by international visitors,” Dunnet said. “Nine of the 11 service industries reported increases this quarter.”

The acceleration in economic growth comes after a moribund middle of the year when production stalled in the face of sinking global dairy prices. That spurred the Reserve Bank to embark on an easing cycle in June, cutting the official cash rate four times to reach 2.5 per cent in last week’s review

On an expenditure measure, GDP grew 1.2 per cent in the quarter, its fastest pace in more than 14 years as investment in air transport drove up capital investment 2.7 per cent, residential building grew 0.9 per cent and household spending expanded 0.6 per cent. Business investment, which excludes residential housing, grew 2.6 per cent in the quarter.

Expenditure expanded 3.5 per cent on an annual basis, as residential construction grew 6.2 per cent, and exports climbed 9.5 per cent in a period where the kiwi dollar depreciated against most of its trading partners. That included a 0.5 percentage point upward revision to the June quarter to 0.7 per cent after the agency changed its benchmarks.

Construction has been a major contributor to the economy in recent years as Christchurch gets rebuilt after the 2010 and 2011 earthquakes, and efforts are made to address the housing shortage in Auckland. On a production measure, construction shrank 2.9 per cent in the quarter heavy and civil engineering work was scaled back. The sector contracted 0.1 per cent from a year earlier.

Agriculture, forestry and fishing was flat in the quarter, with dairy production and manufacturing down in the period.

The size of the economy (in current prices) was $244 billion for the year ended September 2015.

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