New Zealand's economy expanded in the third quarter, albeit at a slower pace, as ongoing weak activity in the primary sector offset a strong recovery in construction and growth in the services industries was softer.

Gross domestic product expanded 0.6 per cent in the three months to September 30 versus a revised 1 per cent expansion in the June quarter and was 2.7 per cent higher on the year, Statistics New Zealand said. Economists had expected GDP to expand 0.6 per cent in the quarter and 2.4 per cent on the year, according to the median in a Bloomberg poll.

The New Zealand dollar rose to 70.12 US cents from 69.75 cents immediately before the release. While the 0.6 per cent quarter-on-quarter growth was in line with forecasts it was actually better than expected given the revision to June.

"Construction activity recovered this quarter, unwinding the previous two quarterly falls," said national accounts senior manager Gary Dunnet in a statement.


Construction activity grew 3.6 per cent versus the June quarter when it shrank 0.7 per cent, marking the largest quarterly growth since March 2016. It was up 1.9 per cent on the year. Residential and non-residential building activities both grew, which was also reflected in an increase in construction trade services.

Expenditure on road and rail infrastructure were key drivers of investment in infrastructure which saw its strongest increase since 2007, Stats NZ said.

Agriculture, forestry and fishing activity contracted 1 per cent as wet weather over the quarter dampened production at the start of the milking season. Overall, agricultural activity was flat for the quarter, with decreased milk production partly offset by increased activity in cattle and sheep farming.

Mining, meanwhile, grew a quarterly 3.2 per cent after shrinking 3.8 per cent in the June quarter. The growth was largely due to higher oil exploration and mining support services, as well as more oil and gas extraction.

Activity in the services industries – which account for about 66 percent of GDP – rose 0.6 per cent in the quarter versus a 1 per cent increase in June.

Within services, health care and residential care expanded 2.1 per cent, the largest increase since March 2016. Both public and private healthcare were up. Retail trade and accommodation slipped 0.4 per cent after rising 2.8 per cent in the June quarter when it was boosted by several major sporting events.

Business services grew 0.9 per cent in the quarter, with advertising, market research and management services as well as legal and accounting services contributing strongly.

Manufacturing activity, meanwhile, expanded 0.7 per cent, unchanged from a 0.7 per cent lift in the June quarter. Within that sector, transport equipment, machinery and equipment manufacturing had the largest rise, lifting 6.4 per cent.


In the other direction, electricity, gas, water and waste services shrank 1.6 per cent as the warm winter saw lower demand for and generation of electricity, Stats NZ said.

On an expenditure measure, GDP expanded 0.9 per cent on quarter and 3 per cent on the year. Spending by households was up 0.9 per cent on the quarter, led by spending on durable goods as households spent more on audiovisual equipment, clothing, furniture and used motor vehicles.

On a per capita basis, GDP grew 0.2 per cent in the quarter from a revised 0.5 per cent expansion in the June quarter. For the year ended September, GDP per capita was up 0.8 per cent.

Stats NZ also said the real purchasing power of New Zealand's income rose in the September quarter with real gross national disposable income – or RGNDI – up 0.7 per cent in the September quarter. RGNDI per capita was up 0.3 per cent in the September quarter following a revised 1.1 per cent lift in the June quarter.

The size of New Zealand's economy in current prices was $278 billion, Stats NZ said.