Economists are unimpressed by news the economy grew in the second quarter, warning much of the growth was due to one-offs and won’t spur the central bank to lift interest rates any time soon.
Gross domestic product (GDP) expanded 0.8 per cent in the three months to July, up from a revised 0.6 per cent expansion in the March quarter and was 2.5 percent higher on the year, Statistics New Zealand said on Thursday.
The median in a Bloomberg poll of 12 economists’ forecasts was for GDP to expand 0.8 per cent in the three months ended June 30 and 2.5 per cent on the year.
Eleven of the 16 industries increased in the June quarter with retail trade and accommodation expanding at the fastest pace in the quarter, Stats NZ said.
However, the quarterly growth was a “fairly subdued outturn given that it benefited from one-offs and rebound factors,” Westpac Banking Corp economist Michael Gordon said.
“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 per cent quarterly rise is not that impressive,” he said.
Transport activity rose 3.5 per cent in June after a 1.6 per cent slide in March.
Wildfires around Christchurch in February had disrupted rail activity in particular, “but this effect has now unwound,” Mr Gordon said.
ANZ Bank New Zealand also dubbed it a “middling result” and noted growth was effectively only back at trend in annualised terms.
“A case could have been made for expecting a larger bounce, given the temporary factors (weather and earthquake disruption) that weighed on activity over the prior six months,” chief economist Cameron Bagrie said.
He said, “it is clear that the economy is not quite firing on all cylinders as it grapples with some meaningful headwinds including late-cycle capacity pressures, a turn in the credit cycle and housing market weakness”.
Thursday’s figures show activity was weighed on by a construction, which contracted 1.1 per cent following the 2.1 per cent decline in the March quarter.
ASB Bank economists said the slide in construction was a surprise and noted the fall in aggregate activity comes despite the boost from the Kaikoura rail link and SH1 reconstruction activity.
“Potentially, capacity constraints are biting on all types of construction activity,” they said, adding GDP growth had been “underwhelming in the past year” and in light of this the second-quarter result is “relatively muted.”
Political reaction differed.
Finance Minister Steven Joyce: “Our economy continues to outperform many developed countries, underpinned by strong export and domestic demand…we need to continue with an economic plan that is working for New Zealand.”
Labour’s finance spokesman Grant Robertson: “On a per-person basis, today’s numbers represent the weakest growth performance for the economy since 2011.”
