Shoppers boost economy - GDP growth better than expected

GDP in the September 2019 quarter was boosted by retail spending. Photo / File

The last big piece of economic data for 2019 shows strong consumer spending lifted the economy in the September quarter.

Gross domestic product increased 0.7 per cent in the September 2019 quarter, boosted by retail spending, Stats NZ said.

That puts it at the upper end of economic forecasts and well ahead of the Reserve Bank's forecast of 0.3 per cent.

"Retail industry growth of 2.4 per cent in the quarter was boosted by robust spending on electronics such as appliances, mobile phones, and computers after a quieter period in the June quarter," StatsNZ national accounts senior manager Gary Dunnet said.

"Consumer spending on these goods was captured in household spending, which rose 0.8 per cent. Spending on durables was up 2.6 per cent, the strongest quarterly growth since the March 2017 quarter," Dunnet said.

This also follows a revised rise of 0.1 per cent in the June 2019 quarter.

For the year to June 2019, GDP growth was initially reported as 2.4 per cent. This has been revised up to 2.8 per cent.

Over the year to September 2019, GDP grew 2.7 per cent, StatsNZ said.

The annual round of revisions to the GDP figures had altered the recent path of growth significantly, making it somewhat harder to interpret, said Westpac senior economist Michael Gordon.

"GDP has been revised up substantially over 2018 – growth for the calendar year has risen from 2.9 per cent to 3.2 per cent," he said.

"This means that the pace of growth held steady over that year, rather than slowing as the previous figures indicated. In contrast, growth in the first half of this year is much weaker than previously reported (although that result will itself be tested in next year's revisions)."

These revisions – and the upside surprise for the September quarter – appeared to be due more to changes in the composition of GDP, rather than significant changes in any particular industries, Gordon said.

"The revised results show that average annual growth rates held up for slightly longer than previously published. However, recent trends remain unchanged, with average annual growth rates slowing over the past few quarters," Dunnet said.

The net result was a small upside to the RBNZ's Q3 GDP forecast, but a back-drop of GDP growth decelerating more sharply than previously believed over 2019," said ASB senior economist Jane Turner.

"We continue to expect the RBNZ to cut the OCR once more in 2020."