Economy grew faster than expected in 2015

Service industries, which account for about 70 per cent of GDP, underpinned the expansion, with retail trade and accommodation up 1.7 per cent. Photo / Getty Images

• GDP stats for the last three months of 2015 have been released.
• They show the economy grew at a faster pace than many had predicted.
• Retail trade and accommodation were up 1.7pc .
• Statistics NZ says record inbound migration has been underpinning our economy.
• Construction activity was up 2.5pc, while the primary sector shrank 1.4pc.

New Zealand's economy grew at a faster pace than expected in the final three months of 2015 on increased activity in business services, a boost in retail and accommodation spending, and renewed construction activity.

The kiwi dollar jumped.

Gross domestic product expanded 0.9 per cent in the three months ended December 31, the same pace as the September quarter, Statistics New Zealand said. That was more than the 0.6 per cent projected in a Reuters poll of economists and the Reserve Bank's forecast of 0.7 per cent.

GDP grew 2.3 per cent from the same quarter a year earlier, also ahead of forecast, and expanded at a 2.5 per cent rate on an annual average basis.

Service industries, which account for about 70 per cent of GDP, underpinned the expansion, with retail trade and accommodation up 1.7 per cent, financial and insurance services expanding 1.2 per cent, and professional, scientific, technical, administration and support increasing 1.5 per cent.

"The increase in business services was driven by increased advertising, market research and management services, as well as scientific, architectural and engineering services," Statistics NZ said.

Record inbound net migration has been underpinning New Zealand's economy over the past year and a half as fewer Kiwis depart for Australia, and on increasing numbers of international students arriving.

The swelling population has meant increased economic activity hasn't driven up prices as much as the Reserve Bank would have estimated, and governor Graeme Wheeler last week cut the official cash rate a quarter point to a record low 2.25 per cent to try to lift inflation back within his target band of between 1-and-3 per cent.

The New Zealand dollar rose to 67.72 US cents after the figures were released, from 67.38 cents immediately before. The trade-weighted index climbed to 72.24 from 71.84, clawing back at least half of its slump last week, when the central bank unexpected cut the OCR and flagged a further reduction.

The increase in business services was driven by increased advertising, market research and management services, as well as scientific, architectural and engineering services.

Today's data show the population grew 0.6 per cent in the December quarter, for an annual increase of 1.9 per cent. That led to a 0.1 per cent fall in real disposable income per capita, following on from a 0.1 per cent contraction in September. On an annual basis, real gross national disposable income per capita shrank 0.4 per cent.

On an expenditure measure, GDP grew 1.1 per cent in the quarter, slowing from a 1.4 percent pace in September, and almost twice the 0.6 per cent forecast in a Reuters poll.

Household spending rose 1.1 per cent in the quarter on increased spending on restaurants, petrol and groceries. Business investment, which excludes residential housing, shrank 2.6 per cent, led by a a 12 per cent contraction in transport equipment and a 5.7 per cent decline in plant, machinery and equipment.

On an annual basis, expenditure grew 3.4 per cent, with a 6 per cent expansion in residential buildings. House building has been a bedrock of the country's economic activity in recent years due to the Canterbury reconstruction effort and heightened activity in Auckland where authorities are trying to encourage building to address a supply shortfall.

Construction activity on the production measure expanded 2.5 per cent in the quarter and was up 2.4 per cent from the same quarter a year earlier.

Tourism has been supporting the economy as a weak kiwi dollar and cheap oil lures foreign visitors, and while non-resident expenditure shrank 1.2 per cent in the quarter it was still up on an annual basis

The primary sector contracted 1.4 per cent in the quarter, following a 0.4 per cent decline in September, with agriculture, forestry and fishing shrinking 1.6 per cent in the three month period due to lower sheep and beef production. On an annual basis, agriculture, forestry and fishing activity increased 0.1 per cent.

See the full GDP release from Statistics New Zealand here: