GDP up 0.6pc - economy now growing for a year

Economic activity was up 0.6 per cent in the March 2010 quarter, says latest GDP stats, following a 0.9 per cent increase in the December 2009 quarter.

Manufacturing activity was up 1.6 per cent, and wholesale trade activity was up 1.4 per cent.

Gross domestic product contracted 0.4 per cent in the year ended March
2010 compared with the year ended March 2009.

"The economy has grown in all four quarters to the end of March 2010," said acting national accounts manager Jason Attewell. "However, economic activity is still below the level seen before the recession, particularly for manufacturing and construction."

A press release issued by Finance Minister Bill English said that four successive quarters of growth was "a welcome sign the economy is continuing to recover, but more work is needed to ensure the rebound in jobs and growth is sustainable".

"The continuing recovery is good news. A growing economy is the only way to create new jobs and raise New Zealanders' living standards," said English.

"The Government has put in place a range of policies to lift sustainable economic growth and they are having an effect, with 170,000 new jobs forecast over the next four years in Budget 2010.

"But the economy still faces serious challenges. We need to continue tilting the economy towards savings, exports and productive industries and away from the rampant growth in government spending and borrowing for housing and consumer spending seen under Labour," he said.

"While the global outlook has strengthened in the past year, it remains fragile, as we can see from the sovereign debt crisis in Europe.

Household consumption expenditure, which measures the volume of goods and services purchased by New Zealand households, was up 0.2 per cent this quarter.

- Activity in primary industries increased 1.7 per cent in the March 2010 quarter, following a 0.5 per cent decrease in the December 2009 quarter.

The forestry, mining, and agricultural industries were the main contributors to the increase in primary industries this quarter.

- Fishing, forestry, and mining activity increased 3.2 per cent in the March 2010 quarter. The mining industry increased 4.5 per cent as a result of coal, oil and gas extraction activity. During the March 2010 quarter, Kupe reached full production; however this was partly offset by a general fall in production across all other oil and gas fields.

- Forestry also recorded growth in the March 2010 quarter, driven by international demand for logs reflected in the exports in the expenditure measure of GDP.

- Fishing activity, a small and variable industry, declined 24.5 per cent.

- Agricultural activity increased 0.8 per cent in the March 2010 quarter as a result of increased milk production, partly offset by a decline in livestock production.

- Dairy production was up this quarter across the country, despite the impact of drought conditions in some regions.

- For the year ended March 2010, primary industry activity increased 3.4 per cent. This compares with a 1.0 per cent decrease for the year ended March 2009.

An increase in the volume of durable goods purchased by households (furniture and major appliances, used cars, and clothing) was partly offset by lower volumes of non-durable goods (food and petrol), and services this quarter.

Central government expenditure was up 1.9 per cent in the March 2010 quarter. During the March 2010 quarter the government accepted delivery of the $93 million offshore patrol vessel HMNZS Otago.

Without the purchase of this ship, central government expenditure would have been up 0.8 per cent.

Goldman Sachs JBWere economist Philip Borkin said the economy grew at a modest level during he March quarter.

"At this stage, we have seen nothing to alter our core views on the outlook and believe the RBNZ will be comfortable hiking again at its July review."

"We will continue to watch the likes of confidence surveys, but also credit growth and housing market gauges. We believe that with the domestic economy hardly "setting the world on fire", the RBNZ has the ability to be more gradual in its approach."

ASB economist Jane Turner said future growth was likely to be driven by the economy's core goods-producing sectors, in part stimulated by strong demand for exports.

The recovery in global economic growth, particularly in the Asia-Pacific region, had helped boost demand for NZ exports and commodity prices, she said.

In contrast, the household sector was likely to take more of a back foot in driving growth in during this economic cycle, she said.

Meanwhile ANZ senior markets economist Khoon Goh said: "The broad story from today's GDP release is that the economy continues to recover, but the speed of the recovery is more muted compared to past cycles."

This reflected the "deleveraging nature" of the recovery, and the need for the economy to continue rebalancing away from the "spending side towards the earning side".

-NZ HERALD