Wed Sep 20 17:45:00 CDT 2017

Consensus Actual Previous Revised
Q/Q percent change 0.8% 0.8% 0.5% 0.6%
Y/Y percent change 2.5% 2.5% 2.5%

New Zealand's economy posted solid growth in the three months to June, with gross domestic product growing by 0.8 percent on the quarter, in line with the consensus forecast and up from the revised 0.6 percent growth recorded in the three months to March. GDP grew by 2.5 percent year-on-year in the three months to June, also in line with the consensus forecast and unchanged from the rate recorded in the three months March.

Headline GDP growth in the three months to June reflected stronger growth in the services sector, up 1.0 percent on the quarter after an increase of 0.5 percent previously, and goods producing industries, up 0.6 percent from 0.3 percent previously. This outweighed the impact of weaker growth in primary industries, where output contracted by 0.8 percent on the quarter following a 2.1 percent increase in the previous quarter. The strong growth in the services sector in the three months to June was partly driven by a significant increase in visitors to New Zealand for major international sporting events.

In expenditure terms, GDP rose 1.1 percent in the three months to June, up from a revised 0.5 percent in the three months to March. This increase was mainly driven by stronger exports, which grew by 5.2 percent on the quarter after an increase of just 0.4 percent in the three months to March, with dairy products and tourism among the main contributors to this increase. Government spending also recorded slightly stronger growth on the quarter, up 1.1 percent from 1.0 percent previously. Household spending, however, posted weaker growth of 0.9 percent on the quarter, down from 1.2 percent in the three months to March, while investment in fixed assets fell 0.8 percent after an increase of 1.1 percent previously.

Although today's data shows an increase in headline GDP growth, this was largely driven by temporary factors with some parts of the economy performing weakly. Officials at the Reserve Bank of New Zealand expect growth will pick up in the near-term, supported by accommodative monetary and fiscal policy, but today's report will likely reinforce their preference to keep policy rates on hold at low levels for now.The RBNZ's next policy meeting is scheduled for next week.

GDP data are a comprehensive measure of a New Zealand's overall production and consumption of goods and services. GDP serves as one of the primary measures of overall economic well-being. GDP calculates the total market value of goods and services produced in New Zealand within a given period after deducting the cost of goods and services used up in the process of production. Therefore, GDP excludes intermediate goods and services and considers final aggregates only. The New Zealand System of National Accounts (NZSNA) is a comprehensive accounting framework based on an international standard (System of National Accounts, 1993).

Gross domestic product (GDP) can be measured using three approaches, namely the production, income and expenditure approaches. The production measure of GDP is derived from firm level data and estimates the value added by all producing industries in the New Zealand economy. The income measure of GDP is derived from earnings data and estimates how the income earned from these producing industries is then distributed throughout the economy as returns to labor, capital and government. The expenditure measure of GDP is derived from data estimating spending on goods and services by final end users and includes consumption, investment and exports minus the value of imports.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.