Rugby World Cup's economic boost

South African rugby fans cheers on their team during the Rugby World Cup. Retail, accommodation and restaurants rose 2.5pc in the third quarter, the biggest gain since the March 2007 quarter. Photo / Kenny Rodger

The New Zealand economy expanded at the fastest pace since 2009 in the third quarter, beating estimates, as manufacturers cranked up production, making up for a contraction in the construction industry.

Gross domestic product rose 0.8 per cent in the three months ended September 30, accelerating from a 0.1 per cent pace three months earlier, according to Statistics New Zealand.

Growth of 0.6 per cent was expected, according to a Reuters survey and the Reserve Bank. GDP grew 1.9 per cent from the same quarter last year.

See the full Statistics NZ release here.

Manufacturing activity rose 2.3 per cent in the latest quarter, led by production of meat, dairy , wood and paper products though this was matched by a build-up in inventories that some economists say could undermine economic growth in coming months. Total inventories climbed by $1.1 billion, driven by manufacturing and distribution stocks, the biggest increase since the series began in June 1987.

Retail, accommodation and restaurants rose 2.5 per cent in the third quarter, the biggest gain since the March 2007 quarter, and the government statistician said this partly reflected the Rugby World Cup.

The manufacturing story "is largely about inventory build-up and that doesn't bode too well for the fourth quarter," Philip Borkin, economist at Goldman Sachs New Zealand, said before the figures were released.

The Bank of New Zealand Performance Manufacturing Index for November fell to 45.7 from 46.6 in October on a scale where 50 marks the difference between contraction and expansion. Production fell to 43.6 in the latest month while inventories grew, with a reading of 51.2. Separately, the Economic Survey of Manufacturing for the third quarter showed a jump in inventories, especially for meat and dairy.

Finance, insurance and business services grew 0.6 per cent, the fourth straight quarterly increase.

Construction fell 2.2 per cent to its weakest quarterly level since June 2002, creating the biggest drag on growth in the latest quarter.

Fletcher Building, the nation's biggest construction company, warned that first-half profit would drop 10 per cent and full-year earnings growth would stall in the face of weak housing construction in Australia and New Zealand.

Finance Minister Bill English issued a statement following the GDP announcement, describing it as "solid growth" despite considerable global uncertainty.

"It's pleasing to see growth picking up again, after a relatively flat second quarter, on the back of an increase in manufacturing and a boost to tourism and spending from the Rugby World Cup," Mr English says.

"This result was achieved against a backdrop of global uncertainty. Since then the global outlook has worsened as Europe seeks solutions to its sovereign debt problems.

"But, the outlook for New Zealand's exports remains positive and rebuilding in Canterbury will have a positive impact as it picks up next year.

"The rebuild, along with high export prices and interest rates at 40-year lows, gives us confidence the economy will continue to experience moderate growth next year," said English.