Economy grows 0.9 per cent in June quarter

11.30am

The economy continued to steam ahead in the June quarter with gross domestic product (GDP) for that period up 0.9 per cent, Statistics New Zealand said today.

GDP growth in the three months to June 30 followed increases of 2.1 per cent and 0.9 per cent respectively in the March and December quarters. Growth in the June 2003 quarter was 0.3 per cent.

The increase was in line with economists' forecasts, a poll by Reuters having the median increase at 0.9 per cent. It was the 16th straight quarterly increase in GDP.

Annual growth in GDP for the June year was 4.4 per cent, following a rise of 3.6 per cent in the 2003 June year.

The Statistics NZ figures were expressed in 1995/96 prices.

Government statistician Brian Pink said internal demand rose 2.2 per cent during the June quarter.

Household spending remained at high levels and was up 0.3 per cent, following a 2.6 per cent rise in the March quarter.

Investment in residential housing continued to be strong and was up 6.6 per cent.

Business investment was also on the rise with investment in fixed assets increasing 5.3 per cent.

External demand was up, thanks to a 2.9 per cent hike in export volumes, with goods up 1.6 per cent and services up 7.5 per cent.

"The increase in service exports largely reflects a strong rise in in-bound tourism spending," Mr Pink said in a statement.

He said most of the increase in internal demand came from imports, which were up 6.7 per cent and easily out-stripping the rise in export volumes.

Merchandise imports rose 9.0 per cent, being driven by rises in transport equipment, up 16.0 per cent, and machinery and electrical equipment, up 9.1 per cent.

However, imports of services fell "because the increased spending by New Zealanders travelling abroad was more than offset by falls in other imported services," Mr Pink said.

Industry production was mixed during the quarter, he said.

Service industries continued to grow, up 0.7 per cent, with wholesale trade and the transport and communication group being the main drivers.

"Activity in goods-producing industries showed little change, with the lift in construction activity (up 6.6 per cent) mostly offset by a decline in manufacturing (down 1.9 per cent)," Mr Pink said.

While manufacturing sales were up in the three months to June 30, overall production fell.

Activity in primary industries fell 0.5 per cent, but was up 1.7 per cent for the June year.

Agriculture production increased 0.3 per cent.

"A lift in livestock production more than offset the fall in dairy output," Mr Pink said, noting that dairy production remained at high levels, increasing 5.0 per cent.

Real gross national disposable income increased 6 per cent in the June year.

- NZPA