Activity in the services industry helped the economy grow 2.8 percent in the last calendar year, according to GDP data released by Statistics NZ on Thursday.
Annual growth is the slowest since 2014.
Quarterly growth was 0.6 percent for the December quarter, up from 0.3 percent in the quarter before.
GDP per capita continues to be sluggish, growing a disappointing 0.1 percent in December 2018, following a 0.1 percent fall in the September quarter. Annual GDP per capita was also disappointing, growing just 0.9 percent — the lowest growth rate since 2011.
That didn’t stop Kiwis having a good time. In fact, it is good times that appear to be driving the economy.
New Zealand consumers had a very merry Christmas, with higher spending on groceries and alcohol, as well services like hotels and eating out, helping drive household spending growth of 1.3 percent in the December quarter. On its own, activity in accommodation, restaurants and bars was up 3.8 percent.
Statistics NZ said growth in retail and accommodation spending was the largest seen since the Rugby World Cup in 2011.
It was good news in general for services, the sector of the economy which includes things like retail, restaurants, transport, and real estate services, which comprises 66 percent of GDP. Services overall grew by 0.9 percent.
But this was offset by disappointing news in the primary industries, which account for 7 percent of GDP. Activity in the primary industries shrank by 0.8 percent. Agriculture was down 1.3 percent, mining fell 1.7 percent, forestry and logging fell 1.6 percent, and fishing fell 0.9 percent.
National accounts senior manager Gary Dunnet said the agriculture results were affected by reduced livestock production, while mining activity was affected by disruptions at the Pohokura field.
The quarterly results were more or less in line with market expectation, with the annual growth slightly ahead.
Economists had been expecting the economy to expand 0.6 percent in the fourth quarter, equating to 2.5 percent over the year according to a Bloomberg poll.
ANZ and KiwiBank economists were both projecting quarterly growth of 0.6 percent, while ASB and Westpac both projected 0.3 percent growth over the quarter.
The Reserve Bank was also an outlier, picking an expansion of 0.8 percent over the quarter.
The slight discrepancy between the Reserve Bank’s projection and Statistics NZ’s data is unlikely to change the bank’s OCR outlook which is due for a hike in March 2021.
An industry to watch is construction, which defied the overall slump in the goods-producing industries to grow by 1.8 percent over the quarter — a massive improvement on the 0.6 percent fall construction registered in the September quarter.
This was driven by an increase in investment in non-residential buildings, which was up 4.1 percent, although investment in residential buildings wasn’t sluggish either, growing 2.1 percent over the quarter.
Overall business investment (which includes all investment less residential buildings) was also up, rising 1.3 percent. This was driven by investment in things like software research and development, and exploration. Although investment in plant, machinery and equipment also managed to rise during the quarter.
The controversy over the effect the removal of departure cards in November 2018 has had on calculating data continues to boil on, with Statistics NZ saying it has had to change the way it calculates household spending. Departure cards helped to calculate spending by overseas tourists and business travels, which now has to be calculated in a different way.
Statistics NZ says this has had a “small impact” on the estimation of household consumption expenditure in the December 2018 quarter.
