Lopsided growth continues

By Brian Fallow

WELLINGTON - Economic growth figures out yesterday confirmed the lopsided nature of the recovery so far, but provided early signs that it may be broadening. The 0.7 per cent March quarter rise in gross domestic product was in line with market and Reserve Bank forecasts and accordingly left the financial markets unmoved.

Private consumption, which is two-thirds of the economy, increased 0.6 per cent, fractionally above its average growth for the previous three quarters. Consumer spending was strongest for durable items like furniture and major appliances, possibly because of low interest rates, Statistics New Zealand said.

But a larger contribution came from business investment, up 4.8 per cent, mostly plant and machinery. That continued the rebound in the December 1998 quarter. "It is encouraging because it means the recovery is not only consumption-led and there is also an element of investment which will increase the economy's productive capacity," Bank of New Zealand economist Peter Jolly said.

ANZ Bank chief economist Bernard Hodgetts said the numbers confirmed a recovering economy, but with growth still rather lopsided. "While some export sectors are managing to throw off the malaise seen in 1997/98 a, weak agricultural sector and still sluggish manufactured exports mean the export sector as a whole is still dragging the chain."

Exports grew 1.5 per cent, seasonally adjusted, but for GDP purposes the export sector includes tourism, which has performed well. Log exports, principally to Asia, grew for the third successive quarter.

But dairy, meat and wool exports were all down. Manufacturing grew 0.4 per cent in the quarter, but is still 1 per cent lower than during the recession quarter of March last year. Bancorp's Stuart Marshall said manufacturers were experiencing erratic growth, with 3 per cent gains made in one quarter with flat or negative quarters on either side.

Growth was strongest in the fishing, forestry and mining sector, which was boosted by increased natural gas production, reflecting heavier reliance than usual on thermal power generation. Transport and communications and the hospitality sector also gained ground. But agricultural output shrank 2.6 per cent, reflecting back-to-back summer droughts.