Growth drops off but still averages 4.3pc annually

By BRIAN FALLOW

The economy grew more slowly in the March quarter, wilting in the dry weather.

Gross domestic product increased 0.6 per cent, slightly above expectations and continuing the pattern of declining rates of quarterly growth of the previous three quarters.

But as it was coming off a period of very strong growth, that was still enough to keep the annual average growth rate at 4.3 per cent, down from 4.4 per cent in December, and the per capita growth rate at 2.7 per cent (2.9 in December), Statistics New Zealand said.

The primary sector contracted. Agricultural production was down 0.8 per cent for the quarter as dry weather in some areas caused stock to be sent for slaughter early, while dairy production tailed off earlier than normal.

The earlier-than-normal livestock kill boosted manufacturing output, however.

Fishing was flat and there was a 2.6 per cent fall in forestry activity as demand for export and saw logs dropped.

Low hydro lakes meant more electricity was produced from thermal stations, which means less value added and is negative for GDP.

Building activity increased 4.5 per cent, maintaining the pace which has seen the annual increase in construction near 19 per cent.

Transport was flat with more domestic travel but less freight. Domestic tourism was up, boosting the accommodation sector, while spending by New Zealanders travelling abroad fell 15 per cent.

On the expenditure side, growth in household spending, which makes up 60 per cent of GDP, slowed to 0.4 per cent, still 3.5 per cent up on the previous March quarter.

Government spending and particularly residential investment also helped to support domestic demand, but business investment was flat.

Net exports boosted demand, with export volumes up 1.6 per cent, reflecting the inflated meat trade, and services exports were up 3.1 per cent.

But import volumes fell, especially imports of services as fewer New Zealanders travelled overseas.

The war in Iraq and the Sars virus were only starting to hit as the March quarter ended. They are expected to have more of an effect on June quarter output, along with electricity-related production cuts. A negative GDP result for the quarter is widely expected.