20 Dec 2018

NZ GDP slows dramatically in lastest quarter

1:09 pm on 20 December 2018

The economy grew at its slowest rate in nearly five years as weaker construction activity and food manufacturing dampened modest gains in other areas.

Workers from South Africa and the United Kingdom will look at opportunities here this weekend.

Official figures show GDP expanded 0.3 percent in the three months ended September. Photo: 123RF

Official figures show Gross Domestic Product (GDP), the broad measure of the health of the economy, rose 0.3 percent in the three months ended September, compared with one percent growth in the previous quarter.

That was lower than most economists had expected.

The annual rate slowed to 2.6 percent from a 3.2 percent.

"Construction activity fell as repair work winds down on roads damaged in the Kaikōura earthquake. However, residential and non-residential construction continued to grow steadily," Stats NZ senior manager Susan Hollows said.

"The largest contribution to the downturn in goods-producing industries was manufacturing, with food manufacturing down significantly."

Construction, which has been a key driver of activity, fell 0.8 percent, although house building remained positive, and agriculture also perked up.

Household spending was steady, growing one percent, as people spent on durable goods such as cars, audio-visual equipment and furniture, while business investment was largely flat.

GDP per capita, a measure of living standards, was unchanged in the quarter, to be one percent higher for the year.

ASB chief economist Nick Tuffley said the economy had been through a tougher time with high petrol prices, and the mid-winter fall in business and consumer confidence.

However, he expected the slowdown to be temporary.

"We're starting to see some tentative signs of a turnaround, we're seeing business confidence start to pick up although it's still at worryingly low levels, and encouragingly you can see signs that discretionary spending is starting to recover a bit after taking a pounding."

Mr Tuffley said the Reserve Bank would be watching the numbers closely to make sure the slowdown was only temporary, and did not need any action to counter it such as lower interest rates. He was picking the RBNZ to keep rates on hold until well into 2020.