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Monthly Economic Indicators

Executive Summary

  • GDP grew 0.8% in the June quarter with strong exports growth and solid growth in consumption being partially offset by weaker residential investment and an unexpected decline in stocks.
  • The current account deficit narrowed in the June quarter, due to a larger services surplus, supported by strong tourism exports.
  • Global growth outlook remains positive as central banks start contemplating reducing monetary policy stimulus.

GDP grew 0.8% in the June quarter with strong exports growth and solid growth in consumption being partially offset by weaker residential investment and an unexpected decline in stocks. Solid demand by New Zealand consumers and strong demand from tourists, whose numbers were boosted by the World Masters Games and Lions tour supporters, saw growth in the services sector of 1.0% in the quarter. Despite the solid real GDP outturn and a rise in the terms of trade, nominal GDP expanded by a modest 0.2% as the GDP deflator declined 0.8%, largely due to a decline in the value of inventories.

Indicators for the September quarter have been mixed. House price growth continues to ease, with annual growth in the REINZ national House Price Index (HPI) dropping to 0.5% in August. However, consumer confidence remains elevated and business confidence has been strong until the most recent data. The Lions tour will continue to support services exports, but the timing of its main impact will vary across different measures and data. Electronic card transactions and building consents have remained subdued.

The annual current account deficit narrowed from a revised $7.7 billion (2.9% of GDP) in the March 2017 quarter to $7.5 billion (2.8% of GDP) in the June quarter. The change was primarily driven by the services surplus widening $0.3 billion to $1.3 billion in June, with quarterly growth in the value of exports of 5.9% outpacing imports growth of 0.7%. Travel services exports (chiefly tourism) grew 7.9% from March, boosted by the World Masters Games and followed a broadly flat March quarter.

Growth in New Zealand’s key trading partners picked up further in the June quarter, with steady growth in Australia and China and accelerating growth in a number of other countries.  While global monetary policy remains accommodative, the US Fed announced moves to begin reducing its holdings of securities built up under quantitative easing (QE), the European Central Bank is discussing scenarios to phase out their QE program, and the Bank of England is contemplating interest rate increases.

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