Gross Domestic Product: June 2008 quarter

All references to quarterly movements are to seasonally adjusted chain-volume series expressed in 1995/96 prices unless otherwise stated.

Quarterly economic growth declines

Economic activity decreased 0.2 percent in the June 2008 quarter, following a decrease of 0.3 percent in the March 2008 quarter. In the year ended June 2008 the economy grew 2.6 percent, up from the 2.3 percent growth recorded in the year ended June 2007.

Service industries recorded their first quarter of negative growth since 2002, down 0.4 percent for the June 2008 quarter. The largest contributors to this decline were finance, insurance and business services (down 0.7 percent), retail, accommodation and restaurants (down 1.9 percent) and wholesale trade (down 1.2 percent). Partly offsetting these decreases were increases in transport and communication (up 1.2 percent), and government administration and defence (up 1.0 percent).

Activity in goods-producing industries was down 0.2 percent in the June 2008 quarter, with construction activity (down 3.8 percent) the main contributor to the decline. Partly offsetting the decline in goods-producing industries was manufacturing activity, which was up 1.4 percent in the June 2008 quarter. The increase in manufacturing activity was largely due to a 2.6 percent increase in food, beverage and tobacco manufacturing.

Activity in primary industries was down 0.6 percent in the June 2008 quarter, with agriculture being the main contributor to the decline.

The expenditure-based measure of gross domestic product (GDP), released concurrently with the production-based measure, recorded a 0.5 percent decrease in the June 2008 quarter.

Household consumption expenditure fell 0.3 percent in the June 2008 quarter, following a 0.4 percent fall in the March 2008 quarter. This is the first time since 1992 that this component has recorded two consecutive quarterly decreases. Expenditure on durable items was down 0.7 percent for the latest quarter, with reduced spending on vehicles the largest contributor to the decrease. Spending on non-durables, such as food and beverages, decreased 0.8 percent in the June 2008 quarter, while spending on services increased 1.1 percent.

Total import volumes were up 3.3 percent in the June 2008 quarter. Imports of plant and machinery were up 19.9 percent, coming mostly from imports of large-value capital goods related to the oil industry. These large-value items were reflected in the strong investment in plant machinery and equipment in the quarter, up 15.6 percent. Overall business investment increased 6.1 percent in the June 2008 quarter.

Total export volumes decreased 0.2 percent, mainly due to a 17.7 percent decrease in exports of dairy products. Partly offsetting the decrease in dairy products were exports of chemical, rubber, plastic and other non-metallic products, and metal products, machinery and equipment.

Gross domestic product by industry

Primary industries

Activity in the primary industries was down 0.6 percent in the June 2008 quarter, following a 4.6 percent decrease in the March 2008 quarter.

Activity across the primary industries was muted this quarter, with agriculture down 0.6 percent, and fishing, forestry and mining down 0.5 percent.

 

The decrease in agriculture output in the June 2008 quarter was mainly driven by reduced dairy farming activity and a decline in beef cattle production (resulting from increased slaughter volumes and decreased slaughter weights). Drought conditions and rising beef prices may have contributed to the earlier than usual slaughter.

Over the June 2008 year, agriculture value added decreased 2.5 percent, largely as a result of decreased dairy farming activity.

Despite the annual decrease in agriculture value added, primary industry activity grew 5.3 percent for the year to June 2008. The positive growth in primary industries came from fishing, forestry and mining (up 27.4 percent), due to mining activity – with the Tui oilfield coming online in the September 2007 quarter.

Goods producing industries

Activity in goods-producing industries decreased 0.2 percent in the June 2008 quarter. The main contributor to this quarter's fall was construction (down 3.8 percent).

The major data source used for estimating construction activity is the Quarterly Building Activity Survey. The Value of Building Activity Put In Place: June 2008 quarter showed a 5.8 percent decrease in all building work. The quarterly GDP measure of construction includes additional factors, such as non-building construction activity (eg roads and bridges) and a transfer cost component.

Electricity, gas and water activity declined 1.6 percent in the June 2008 quarter. This resulted from drought conditions leading to a greater than usual proportion of electricity generation being produced by thermal sources. Thermal electricity sources are relatively more expensive than hydro, and therefore contribute lower value added. (Ministry of Economic Development, New Zealand Energy Quarterly: June 2008)

Manufacturing (up 1.4 percent) offset some of the decline in activity in goods-producing industries this quarter. Food, beverage and tobacco manufacturing drove this increase (up 2.6 percent). Wood and paper products, and textile and apparel manufacturing were the only components of manufacturing to decrease this quarter (down 5.6 percent and 2.6 percent, respectively).

 

For the year ended June 2008 activity in goods-producing industries increased 0.1 percent

Services industries

Service industry activity was down 0.4 percent in the June 2008 quarter, following a 0.5 percent increase in the March 2008 quarter. In the past decade there has only been one other quarter of negative growth in service industries – a 0.6 percent decrease in the September 2002 quarter.

Finance, insurance and business services was the largest contributor to this quarter's decline in service activity (down 0.7 percent). Within this grouping, real estate and business services drove the decline (down 1.6 percent). Finance and insurance services partly offset this decline (up 0.4 percent).

 

Also contributing to the June 2008 quarter's decrease in the service industries were retail, accommodation and restaurants (down 1.9 percent), and wholesale trade (down 1.2 percent).

The declines in services activity were partly offset by growth in transport and communications (up 1.2 percent), government administration and defence (up 1.0 percent) and personal and community services (up 0.4 percent).

For the year ended June 2008, service industries were up 3.4 percent compared with growth of 3.8 percent in the year to June 200

Expenditure on Gross Domestic Product

Expenditure on GDP recorded a 0.5 percent decrease for the June 2008 quarter. While the production- and expenditure-based measures are both official series, the production-based measure has historically shown less volatility and is the preferred series for quarter-on-quarter changes.

Households

Household final consumption expenditure decreased 0.3 percent in the June 2008 quarter, following a 0.4 percent decrease in the previous quarter. Household consumption expenditure measures the expenditure by New Zealand-resident households. The Retail Trade Survey: June 2008 quarter recorded a 1.5 percent decrease in sales volumes.

 

Household expenditure on durables decreased 0.7 percent for the quarter, following a 2.9 percent decrease in the March 2008 quarter. A reduction in household spending on vehicles has been the main contributor to the fall in durables in the latest quarter.

Expenditure on non-durable items decreased 0.8 percent from the March 2008 quarter, due mainly to lower volumes of food and beverages being consumed by households (down 0.6 percent).

Expenditure on services increased 1.1 percent in the June 2008 quarter, following a 0.3 percent increase in the March 2008 quarter. The increased expenditure on services in the latest quarter was mainly due to health-related expenditure, followed by domestic air travel. Partly offsetting these increases was reduced household expenditure on international air travel.

Investment in new housing was down 8.2 percent in the June 2008 quarter, following decreases of 5.2 percent and 2.3 percent in the March 2008 and December 2007 quarters, respectively. Residential building activity was down 7.3 percent, as reported in the Value of Building Work Put in Place: June 2008 quarter release. For the year ended June 2008, investment in residential building decreased 2.4 percent.

 

Business investment

Business investment in fixed assets increased 6.1 percent in the June 2008 quarter, following a decrease of 0.5 percent in the March 2008 quarter. For the year ended June 2008, business investment in fixed assets rose 5.6 percent, compared with an increase of 0.8 percent for the year ended June 2007.

 

Investment in plant and machinery was up 15.6 percent in the June 2008 quarter, double the 7.8 percent increase in the March 2008 quarter. Imports of plant and machinery capital goods were up 19.9 percent in the latest quarter, mainly due to large one-off items related to the oil industry. Domestic production of machinery and equipment also increased in the quarter.

Investment in other construction increased in the June 2008 quarter (up 6.7 percent). Offsetting this increase were declines in investment in non-residential buildings, intangible assets, and transport equipment. Non-residential building activity was down 3.6 percent, as reported in the Value of Building Work Put in Place: June 2008 quarter release.

Overall total inventories were built up by $369 million in the June 2008 quarter. Distribution inventories provided the largest contribution to the increase in inventories, with a build up of $508 million. Forestry inventories also increased in the quarter, while both agriculture and manufacturing reported a run down. The drop in agriculture inventories is consistent with the decrease in production, and increase in exports, of agriculture and fishing primary products.

Government

General government final consumption expenditure increased 0.5 percent in the June 2008 quarter, and has increased 4.5 percent for the year ended June 2008. Central government recorded a 0.6 percent increase in expenditure in the quarter, with increases in central government administration and education the main contributors. Local government final consumption expenditure decreased 0.9 percent in the June 2008 quarter.

Exports and imports

Export volumes decreased 0.2 percent in the June 2008 quarter, following a 1.9 percent decrease in the previous quarter. Export volumes for the year ended June 2008 were up 2.1 percent, down from the 3.3 percent increase for the year ended June 2007.

Merchandise export volumes in the June 2008 quarter decreased 1.8 percent, with decreased volumes of dairy product exports the largest contributor to the decline. Exports of dairy products were down 17.7 percent in the June 2008 quarter, and down 7.8 percent in the year to June 2008. Partly offsetting the quarterly decrease in dairy product exports were increases in exports of chemical, rubber, plastic and other non-metallic products (up 20.0 percent), and metal products, machinery and equipment (up 4.9 percent).

Exports of services were up 0.1 percent in the June 2008 quarter. Exports of travel services increased 2.0 percent this quarter, following three quarters of decreases. Miscellaneous service exports (up 10.3 percent) contributed the most to the increase in total exports of services this quarter. This category covers services such as merchanting, accounting and consulting.

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Import volumes were up 3.3 percent in the June 2008 quarter. Both merchandise import volumes and imports of services increased 3.0 percent in the quarter. On an annual basis, import volumes were up 9.7 percent for the year ended June 2008, compared with a 1.7 percent increase in the year to June 2007.

Imports of machinery and plant were strong again in the June 2008 quarter, up 19.9 percent, following an increase of 10.6 percent in March 2008. Investment in plant machinery and equipment increased 15.6 percent in the June 2008 quarter. For the year ended June 2008, imports of plant machinery and equipment increased 23.7 percent. Imported volumes of transport equipment also increased in the June 2008 quarter (up 19.3 percent), leading to an overall 28.2 percent increase in imports of capital equipment this quarter.

Imports of consumption goods increased 2.3 percent in the June 2008 quarter, while imports of intermediate goods decreased 0.5 percent.

The 3.0 percent increase in imports of services in the June 2008 quarter is mainly due to increases in miscellaneous services and freight. The Balance of Payments and International Investment Position: June 2008 quarter release reported that imports of services relating to oil exploration and production increased in the quarter, as well as management fees. Imports of travel services decreased 5.7 percent in the June 2008 quarter.

Real gross national disposable income

Real gross national disposable income (RGNDI) increased by 5.0 percent for the year ended June 2008, while GDP increased by 2.6 percent.

 

GDP is a measure of economic activity. RGNDI is a measure of the volumes of goods and services that New Zealand residents have command over. It takes into account changes in the terms of trade effect (the price of imports relative to the price of exports), and real gains from net investment and transfer income with the rest of the world.

The relatively higher growth in annual RGNDI, when compared with GDP annual growth, is a result of strong growth in the terms of trade in the first three quarters of the year to June 2008. While the terms of trade index decreased 0.5 percent in the June 2008 quarter, in the year to June 2008 it recorded a 10.4 percent increase.

Implicit price deflators

The GDP implicit price deflator (IPD) for the year ended June 2008 increased 4.8 percent. The GDP IPD is a broad measure of the overall price change for final goods and services produced in New Zealand.

The IPD for gross national expenditure was up 2.3 percent for the year ended June 2008. This provides a broad measure of the overall price change for final goods and services purchased in New Zealand (such as consumer and investment goods).

Revisions

Production measure

• Since the March 2008 quarter release, all industries have been revised due to the incorporation of current price annual industry value added statistics for 2004 and 2005 (derived from balanced supply-use tables) and the updating of annual chain-linking weights.
• Incorporation of current price annual data can cause level shifts in published series, but the impact on quarterly movements has been kept to a minimum.
• Incorporation of revisions to the Wholesale Trade Survey and the Economic Survey of Manufacturing have flowed through to GDP.
• Revisions to the Producers Price Index had a minimal impact on quarterly GDP.
• As a part of our ongoing quality improvement project, we have updated the methodology for measuring insurance, water, and oil and gas exploration. For more information, see the technical notes of this release.

Expenditure measure

• Household consumption expenditure and change in inventories have been revised as a result of new current price annual industry value added statistics incorporated for the production measure of quarterly GDP.
• Revisions implemented in the Balance of Payments have been incorporated into imports and exports figures, and household consumption expenditure measures of travel services, from the June 2004 quarter.
• Revisions to both the Producers Price Index and Economic Survey of Manufacturing have flowed through to the change in inventories series for quarterly GDP.
• Revised information from the Overseas Trade Price Index has flowed through into the December 2007 quarter imports series for quarterly GDP.
• As a part of our ongoing quality improvement project, we have updated methodology for measuring central government final consumption expenditure. For more information, see the technical notes of this release.

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For technical information contact:
Annabel Montgomery or Emma Coll
Wellington 04 931 4600
Email: info@stats.govt.nz