Growth slows - GDP up just 0.3pc

Weak manufacturing data pulled economic growth down to half the expected level in the last quarter of 2011. Photo / Dean Purcell

New gross domestic product (GDP) stats just released show the economy grew at an unexpectedly slow rate at the end of 2011, rising just 0.3 per cent.

Economists and the Reserve Bank were expecting 0.6 per cent growth.

This means annual economic growth last year was just 1.4 per cent, rather than the predicted 1.6 per cent.

The main industry movements were in agriculture, which was up 3.5 per cent and manufacturing which fell 2.5 per cent.

Retail, accommodation and restaurants increased by 2.2 per cent and the finance, insurance and business services rose 1.3 per cent.

Government administration and defence was down 2.3 per cent - the largest fall since the December 1998 quarter.

National accounts manager Rachael Milicich said growth during the quarter was driven by good growing conditions for agriculture, more business services, and spending on the Rugby World Cup.

"Weaker manufacturing compared with last quarter dragged the overall result down," said Milicich.

A recent Reuters survey of 11 economists expecting GDP to have grown 0.6 per cent, slowing from a pace of 0.8 per cent three months earlier.

That would have pushed annual average growth up from 1.3 to 1.6 per cent. The Reserve Bank was also looking for 0.6 per cent.

After the figures were released the New Zealand dollar fell to 81.09 US cents, from 81.48 cents immediately before.

The figures come after respondents to the New Zealand Institute of Economic Research's quarterly survey cut their growth expectations for a second time as the rebuild in Canterbury suffers from ongoing delays amid persistent seismic activity.

Last week, the BNZ-Business NZ performance of manufacturing index showed the sector last month recorded its highest level of activity in two years, with a production bounce tipped for the first quarter of 2012.

The September quarter's growth of 0.8 per cent was the highest-equal rate for four years.

"GDP was weaker than market expectations. It showed mixed rates of sector performance, with activity underpinned by good climatic conditions, the tail end of the Rugby World Cup and signs that the construction sector has turned the corner," said the ANZ Bank in a statement.

"Elsewhere activity was weaker, with signs the recovery did not gain traction in Q4. We expect further slow rates of growth in the first half of 2012 as structural imperatives and a post Rugby World Cup lull temper the usual cyclical rebound."

The bank's economists said they "continue to look for a December 2012 start to the tightening cycle," of the Reserve Bank, but stressed this was based on an assumption that economic momentum in the NZ economy would pick up in the second half of this year.

"At first blush, we regard this as a slight downside surprise, but it doesn't alter our overall impression of the economy," said Westpac Bank economist Dominick Stephens.

Evidence on the Christchurch rebuild was mixed. Investment in buildings, both residential and non-residential, was up sharply, he said.

"However, it seems much of this investment went into service categories. On the production accounts, hard construction activity was up only 1.5 per cent, less than expected."

- HERALD ONLINE / BUSINESSDESK