GDP grew by 0.5 percent in the March 2018 quarter, slowing from 0.6 percent growth in each of the previous two quarters.
The latest figures show annual GDP growth for the year ending March 2018 at 2.7 percent, down from the lofty heights of December 2016, when annual growth hit 4 percent.
New Zealand appears to be in the middle of the pack internationally. Australia’s annual GDP growth is 3.1 percent, Canada is on 2.3 percent, and the Euro area on 2.5 percent. Average growth around the OECD is exactly 2.7 percent.
Broken down the figures show growth easing in the service industries, which saw their growth nearly halve to 0.6 percent from 1.1 percent. The biggest drivers of growth in this sector were business services which grew 1.0 percent and information and telecommunication services, which grew 2.3 percent, the biggest increase since the June 2015 quarter.
Two key indicators will give the Government some cause for concern. Household spending was flat in the March 2018 quarter, down from a 1.2 percent rise in the previous quarter. It is the first quarter in which household spending has not grown since September 2012.
This could reflect households' diminishing confidence in the economy, although other factors such as the reduced availability of imported cars after stink bugs were detected in car shipments could also be a factor.
The other factor that will worry the Government is flat GDP per capita. This was unchanged in the March 2017 quarter, slowing still further from a 0.1 percent increase in the previous quarter. Opposition Finance Spokesperson Amy Adams has been increasingly critical of Finance Minister Grant Robertson’s performance in this area.
For the year ending March 2018 GDP per capita growth was just 0.6 percent.
But there was some good news too. Primary industries grew 0.6 percent after falling 2.6 percent in the previous quarter. This was due to increased agricultural activity fuelled by increased milk production after better weather conditions in February and March.
The GDP per capita slowdown was broadly in line with market expectations, which expected a modest slowdown in GDP growth as export earnings peak and investment slows. ASB, Westpac, and ANZ all projected 0.4 percent growth in the quarter, while the Reserve Bank’s May monetary forecast projected 0.7 percent.
This means the figures out today are lower than the RBNZ’s forecast, but it’s unclear whether this will alter the Bank’s timeline for a rate change, currently on track for September 2019.
ASB’s Senior Economist Jane Turner noted that “forward looking indicators are positive for Q2 and we do expect some payback from a weak number”.
“Our key concern is not so much soft growth in Q1 but the prospect for the underlying pace of growth to weaken further if business confidence remains low into the second half of 2018,” she said.