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NZ GDP - weaker than expected, but where?

17 September 2015
New Zealand June quarter GDP came in weaker than expected at 0.4% quarter on quarter (qoq).  Forecasts were for an increase of 0.6%.  Annual (2.4%) and annual average (3.0%) measures came in closer to expectations thanks to positive revisions.
The high level breakdowns saw primary industries post a quarterly rise of 2.1%, the goods-producing industries rose 0.4% while service industries posted 0.5%.  However, total GDP managed only 0.4%.  The reason lies in the usually innocuous and always mysterious ‘balancing item’ which made a significant negative contribution over the quarter.  Make of that what you will. 
At a finer level of detail, each of the sectors came in largely as expected.  The agriculture and mining sectors showed the expected bounce-back from the weak March quarter, construction posted a modest rise and manufacturing saw a modest contraction.
But there’s no getting past the fact that this is another soft GDP result.  The economy has expanded a relatively miserly 0.6% in the first six months of the year, and on our current forecasts annual growth looks set to dip below 2.0% in the year to September. 
The good news is that financial conditions are significantly easier than they were just a few months ago.  The exchange rate is 15% lower on a trade-weighted basis and the Reserve Bank of New Zealand (RBNZ) has been reducing interest rates which will help support growth in the period ahead.  We expect the RBNZ will cut the Official Cash Rate again in October.
This blog post has been prepared to provide general information and does not constitute 'financial advice' for the purposes of the Financial Advisors Act 2008 (Act). An individual investor should, before making any investment decisions, consider the information available in the relevant Product Disclosure Statement and seek professional advice. While every care has been taken in the preparation of this document, AMP Capital Investors (New Zealand) Limited and the AMP Group (together, 'AMP') make no guarantee that the information supplied is accurate, complete or timely and do not make any warranties or representations in respect of results gained from its use. The information is not intended to infer that current or past returns are indicative of future returns. The views expressed are those of the author and do not necessarily reflect those of AMP. These views are subject to change depending on market conditions and other factors.

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