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Monthly Economic Indicators

Executive Summary

  • The economic recovery continued in the year ending December 2011
  • Major economic drivers over the year included the Rugby World Cup and agricultural production with offsets from natural disasters and government debt crises overseas
  • The theme of stabilisation in the global economy continues, but risks remain

The economy grew 1.4% in the year ending December 2011, the fastest pace in over three years. The Rugby World Cup (RWC), exceptional pastoral growth and high export prices provided a powerful antidote to the disruptions caused by natural disasters at home and abroad and by government debt woes overseas. The RWC lifted private consumption spending and tourism numbers; however natural disasters in New Zealand and Japan, combined with economic weakness in Europe and the United Sates, provided an offset. The result was a moderate increase in total tourist numbers and spending.

Increased activity in the property and business services industry, likely reflecting activity related to both the RWC and the Canterbury earthquakes, accounted for half of the rise in total GDP over 2011. Exceptional pastoral production also contributed to growth and helped lift dairy export volumes to record levels in the December quarter. As a consequence New Zealand's trade surplus reached its highest level in a decade and helped limit the current account deficit to 4% of GDP.

Good pastoral farming conditions have continued into 2012, providing a firm base for activity to build on over 2012. Our March round of business talks, which is featured in our Special Topic, suggested growth in early 2012 will be maintained at a similar pace to that over 2011. Other indicators of business activity point to a rising pace of growth later in the year. However, as indicated in last month's report, the outlook for the 2012 calendar year appears weaker than in February's Budget Policy Statement (BPS).

The stabilisation seen in the global outlook in February continued in March, with the Greek debt restructuring completed and a continued positive tone in US data. Consensus forecasts for New Zealand's main trading partners remained at 3.5% for 2012 and 4.0% for 2013, similar to the assumptions underlying the Budget Policy Statement forecasts. While the risks of severe global disruption arising from the euro debt crisis have been significantly reduced in the near term, risks remain to the downside and may have just been pushed out in time.

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