Economy expanded 0.6 per cent in September quarter

The economy grew 0.6 per cent in the September quarter -- bang on economists' forecasts -- Statistics New Zealand figures showed today.

The growth rate in the September year was 4.6 per cent, up from 4.4 per cent in the June year and 3.7 per cent in the September 2003 year.

The annual growth rate is the strongest since December 2002 and has been 3.4 per cent or better for 11 successive quarters.

The quarterly figure is well below the Reserve Bank's forecast of 1.0 per cent which augurs well for the bank not following through its threat earlier this month to hike interest rates again.

Economists estimate the economy grew about 1.0 per cent in the current December quarter which would mean annual growth would rise to about 5.0 per cent.

The September quarter growth was double Australia's but equal to the Organisation for Economic Co-operation and Development (OECD) average.

Growth in the quarter was driven by internal demand, up 2.4 per cent, offset by a 5.7 per cent fall in export volumes.

Household consumption rose 1.7 per cent, business investment in fixed assets rose 4.2 per cent and a continuing build-up of inventories sustained internal demand in the quarter.

Household spending on durable goods increased 3.7 per cent with particularly strong spending on recreational goods, furniture and major appliances.

Spending on non-durables rose 1.4 per cent and services 0.7 per cent.

Investment in new housing fell by 7.1 per cent from a record high in the June quarter.

The increase in business investment came mainly from an increase in oil and natural gas exploration and spending on infrastructure assets and transport equipment.

Internal demand was 7.7 per cent above the level in the September 2003 quarter.

On the export front, all categories except wood products fell. Dairy product exports fell 24.1 per cent as tighter inventory controls at the end of the 2003/4 season resulted in less product available for export.

Export services rose 2.7 per cent in the quarter thanks to a lift in spending by tourists.

Import volumes were flat in the quarter, with a fall in merchandise goods offset by a rise in services. However, import volumes over the year were up 15 per cent.

Spending on overseas travel by New Zealanders rose 26.4 per cent in the year.

Most of the quarterly growth came from increased activity in the service sector. Wholesale trade activity rose 1.0 per cent and retail, accommodation and restaurants group rose 2.5 per cent, with retail sales the main contributor. The increase in retail activity this quarter is the highest recorded in 15 successive quarters of positive growth.

Transport and communication services rose 1 per cent which activity in the finance, insurance and business services group was virtually unchanged.

Activity in goods producing industries was also little changed with manufacturing up just 0.1 per cent and construction down 1.1 per cent.

Per capita growth in the September year was an inflation adjusted 3.1 per cent.

- NZPA