The GDP numbers released by Statistics NZ on Thursday morning make for mixed reading, with a hot summer hitting New Zealand's dairy industry.
GDP growth for the December 2017 quarter was 0.6 percent, slightly below the market median forecast of 0.8 percent and the Reserve Bank’s forecast of 0.7 percent.
GDP growth for the year ending December 2017 was 2.9 percent, down from the four percent high reached in 2016. The primary sector proved a drag on GDP, as the hottest summer on record caused agricultural production to fall and GDP per head continued to lag behind overall GDP growth.
The slump in the primary sector should cause concern, with primary industries down 2.4 percent. This weakening is particularly pronounced in agricultural production, down 2.7 percent, which Statistics NZ put down to the weather.
The hot summer is also being blamed for poor dairy production, flowing onto dairy manufacturing and exports, which fell dramatically by 4.4 percent.
This should worry observers. Last summer might have been the hottest on record, but there’s a good chance summers to come will be even hotter.
GDP was rescued somewhat by the service industries. These grew 1.1 percent, driving overall economic growth.
The economy is still struggling to convert GDP gains into productivity growth. GDP per capita only rose 0.1 percent in the December 2017 quarter, down from 0.2 percent in the September quarter.
This is the lowest GDP per capita growth since 2011 and shows the continued effects of high migration in driving GDP growth.