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Monthly Economic Indicators

Executive Summary

  • GDP growth slowed in the final quarter of 2016 but is expected to recover over 2017
  • Despite slower real GDP growth, nominal GDP increased strongly as dairy prices rose
  • The current account deficit narrowed to 2.7% of GDP and New Zealand’s net international liability position fell to a post-2000 low of 59.9% of GDP
  • Internationally, political developments continued to drive financial market sentiment

Real GDP growth slowed in the final quarter of 2016 and was weaker than anticipated in the Half-Year Economic and Fiscal Update (HYEFU). However, much of the weakness appears to be due to temporary factors and the growth outlook remains positive.

In contrast to the slowdown in real activity, nominal GDP growth accelerated, as the terms of trade rose sharply on higher dairy prices. The strength of nominal GDP is reflected in tax revenue, which remained above our HYEFU forecast in the seven months ended January. 

Increased spending by overseas visitors to New Zealand also supported national income growth and contributed to a further narrowing of the current account deficit. The recent run of lower deficits has been accompanied by a downward trend in New Zealand’s net international liability position, which fell to a fresh low of 59.9% of GDP in December.    

Internationally, political developments continued to drive financial market sentiment. Headline inflation continued to rise in many economies, driven by fuel price movements, although underlying inflation generally remains low and monetary policy remains highly accommodative.     

This month’s special topic covers some of the key insights from the Treasury’s March 2017 business talks. The overall view of businesses was one of ongoing economic expansion, supported by solid population growth, high tourist numbers and positive employment and investment intentions.

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