Modest GDP growth as manufacturing declines

Economic activity, as measured by gross domestic product (GDP), increased 0.2 percent in the June 2010 quarter, Statistics New Zealand said today. A 4.0 percent decrease in the manufacturing industry offset nearly all the growth this quarter.

By industry, the largest contributors to the increase in economic activity in the June 2010 quarter were:

• construction, up 6.4 percent, the largest increase since the September 2003 quarter
• finance, insurance, and business services, up 0.5 percent, due to real estate and business services.

"All manufacturing sub-industries, with the exception of wood and paper products, were down in the June 2010 quarter," acting national accounts manager Stephen Oakley said. "The largest decline was in food, beverage, and tobacco manufacturing."

GDP for the year ended June 2010 was up 0.7 percent when compared to the year ended June 2009. This annual increase in GDP is the first since the year ended September 2008.

The expenditure measure of GDP increased 0.4 percent in the June 2010 quarter. The production measure of GDP shows the volume of goods and services produced in the economy, while the expenditure measure shows how those goods were used. The volume of goods and services purchased by New Zealand households was flat this quarter. An increase in durable goods (furniture and appliances, clothing and footwear, and used cars) was offset by a decrease in services (spending on phone calls, medical services, and domestic air travel).

Gross fixed capital formation, which measures investment in fixed assets, was up 6.2 percent in the June 2010 quarter. This is the largest increase in fixed asset investment since the March 2004 quarter. The main contributors to the increase in fixed asset investment were residential building investment, up 11.1 percent, and investment in intangibles, which includes mineral exploration, up 10.3 percent.

The Canterbury earthquake occurred in September 2010, so GDP for the June 2010 quarter is not affected. Details on how this and other natural disasters impact on the economy are discussed in the commentary section of this release.