New GDP figure confirms economy (was) booming

Shoppers make the most of fine weather in Auckland's CBD in the Queen St area over summer. Photo / NZME

Gross domestic product (GDP) rose 2.8 per cent in the June 2021 quarter, following a 1.4 per cent increase in the March 2021 quarter, Stats NZ said today.

That is well ahead of market estimates for around 1.1 per cent and confirms the economy was running red-hot before the latest lockdowns.

That equates to a 17.4 per cent bounce from the same quarter last year - coming off a low, lockdown-affected base.

On an annual average basis it equates to 5.1 per cent growth for the year.

The New Zealand dollar rallied about 20 pips to US$71.36c on the back of the news.

"It shows that we were at a very strong point before we went into the last lockdown," ANZ strategist David Croy said.

Market expectations are for the Reserve Bank to lift its official cash rate (OCR) by 25 basis points on October 6.

"It solidifies the case for a rate hike in October," Croy said.

The data also added to a general sense of nervousness that the Reserve Bank may lift the rate by as much as 50 basis points next month, he said.

The OCR currently sits at 0.25 per cent.

The rise in New Zealand's activity in the second quarter would be well and truly undone in the current (third) quarter due to the lockdown, said Ben Udy at Capital Economics.

"But as restrictions ease we expect growth to rebound again in [the fourth quarter]."

"We've pencilled in a decline of around 4 per cent (q/q). However, as cases have come under control the remaining restrictions should be eased in the weeks ahead so we have pencilled in a near full rebound in Q4," he said.

"We expect New Zealand to be back on its pre-Delta path by Q1 next year."

The 2.8 per cent rise in June 2021 quarter GDP was led by the services industries. The primary and goods-producing industries also contributed to growth in the quarter.

Retail trade and accommodation was the largest contributor to GDP growth in the June 2021 quarter, driven by higher activity in accommodation and food services.

Most of New Zealand was in alert level 1 for the entire June 2021 quarter, apart from Wellington, which spent six days in alert level 2 at the end of June.

"Prior to the Covid-19 pandemic, the June quarter traditionally showed a large decrease in international travel-related activity, following the peak summer season in the March quarter," national accounts senior manager Paul Pascoe said.

"However, Covid-19 has interrupted that seasonal pattern markedly.

"Opening the transtasman travel bubble with Australia in the June 2021 quarter also contributed to services industries with links to tourism, such as retail and accommodation, and transport," Pascoe said.

More to come