The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services.
Gross domestic product rose 0.8 per cent in the fourth quarter, from a revised 0.9 per cent increase three months earlier, according to Statistics New Zealand. The economy grew 3.3 per cent in calendar 2014, the fastest pace since 2007, before the global financial crisis.
The pace of growth broadly matched expectations in a $238 billion economy that has benefited from migration-fuelled population growth, an improving labour market, lower borrowing and fuel costs, and rising house prices. Tourists also helped drive growth, spending $7.4 billion in 2014, up 13 per cent from the previous year. Tourists helped lift retail trade and accommodation by 2.3 per cent in the fourth quarter, the highest since the Rugby World Cup-boosted third quarter of 2011.
"While some of this growth comes from more spending by New Zealanders, overseas visitors had a bigger impact," said Gary Dunnet, the government statistician's national accounts manager. "Spending by Chinese, US and UK visitors all increased in 2014, though Australians spent less."
Rental, hiring and real estate services grew 1.2 per cent in the final three months of 2014, reflecting an increase in house sales. The annual gain was 1.6 per cent.
"Q4 growth will continue to be largely led by domestic forces, with strong population growth, low interest rates and healthy household confidence boosting demand," economists at ASB said in a preview of the GDP data. "We expect these areas to remain key drivers of growth over 2015."
Growth is seen abating only slowly, according to the NZ Institute of Economic Research's consensus forecasts published this week. That showed expectations for 3.3 per cent growth in the 12 months ending March 31, slowing to a 2.9 per cent pace in 2016 and 2.8 per cent in 2017. Today's data confirms the economy is continuing to grow at a sturdy pace, while inflation remains subdued.
Manufacturing grew 1 per cent in the fourth quarter, led by a 5.4 per cent gain for petroleum, chemical, plastics and rubber. Imports of intermediate goods such as fuels, lubricants and industrial supplies jumped 7.5 per cent.
Food, beverage and tobacco manufacturing rose 1.5 per cent in the quarter, while exports of meat rose 3.7 per cent and dairy exports rose 2.5 per cent.
Metal product manufacturing fell 2.5 per cent and wood and paper product making fell 5.2 per cent.
Growth over H1 2015 will likely slow, dragged by the decline in milk production but we expect domestic demand to remain buoyant and the Reserve Bank is largely focus on this momentum.
The expenditure measure of GDP rose 1.1 per cent in the fourth quarter, matching the third-quarter pace. Spending by overseas visitors accounted for a 6.1 per cent gain in exports of goods and services, while household consumption gained 0.6 per cent.
The data showed a 0.5 per cent decline in real gross national disposable income (RGNDI), a measure of purchasing power, in the fourth quarter, the first drop since the second quarter of 2012. Statistics New Zealand said RGNDI growth had reflected strengthening terms of trade, which fell in the fourth quarter. RGNDI rose 5 per cent in the year.
ASB senior economist Jane Turner said the final quarter of 2014 finished "on a reasonably strong note."
"Quarterly growth of 0.8 per cent was in line with market and Reserve Bank expectations. The breakdown of growth was largely domestic led, but with an added boost from very strong tourist spending, and fits with our view that underlying momentum was robust over the second half of 2014."
Turner said quarterly growth was bang on the Reserve Bank's March monetary policy statement forecast. She said the Bank would be encouraged by evidence of building momentum in underlying economic demand and reasonably broad-based growth.
"Growth over H1 2015 will likely slow, dragged by the decline in milk production but we expect domestic demand to remain buoyant and the Reserve Bank is largely focus on this momentum. We expect that inflation pressures will start to pick up over 2015, albeit from low levels."
Turner said she continued to expect the Reserve Bank to leave the OCR unchanged at 3.5 per cent over the foreseeable future, although still maintain a bias of a near-term rate cut (25 per cent chance) due to persistently weak inflation pressures.