Bloomberg News

New Zealand Economic Growth Accelerated on Rugby Spending

January 04, 2012

(Updates with economist comments in fourth paragraph, finance minister’s response in sixth paragraph.)

Dec. 22 (Bloomberg) -- New Zealand’s economy grew faster than economists forecast in the third quarter, as Rugby World Cup spending gave a temporary lift to an economy struggling to recover from earthquakes.

Gross domestic product rose 0.8 percent in the three months ended Sept. 30 from the previous quarter, when it increased 0.1 percent, Statistics New Zealand said in a report released today in Wellington. Growth was faster than the 0.6 percent median projection in a Bloomberg News survey of 14 economists.

Investors are betting Reserve Bank Governor Alan Bollard will see the spending by rugby fans as a one-time boost and hold the official cash rate at a record-low 2.5 percent until late next year. The central bank forecasts a stronger recovery in 2012, assuming rebuilding of earthquake-devastated Christchurch accelerates in the second half of the year.

“We can expect a softer run of GDP numbers over the next few quarters as the Rugby World Cup impact washes out of the data,” said Mark Smith, an economist at ANZ National Bank Ltd. in Wellington. “We continue to look for a December 2012 start to the tightening cycle, barring a global meltdown.”

New Zealand’s dollar was little changed after the data. It bought 77.05 U.S. cents as of 11:45 a.m. in Wellington from 77.08 cents immediately before the report.

‘Global Uncertainty’

New Zealand’s growth “was achieved against a backdrop of global uncertainty,” Finance Minister Bill English said in an e-mailed statement. “We face challenges from increasingly volatile global financial markets, reduced demand for our products in some markets and a high kiwi dollar.”

The currency, known as the kiwi, has risen 3.1 percent the past month against the U.S. dollar, the biggest gainer among the Group of 10 currencies.

The economy grew 1.9 percent from the year-earlier quarter, less than the 2.2 percent pace estimated by economists. Growth in the fourth-quarter of 2010 and the first quarter this year was revised lower after updated data on metal product manufacturing, the statistics agency said.

Bollard on Dec. 8 forecast a third-quarter expansion of 0.6 percent, down from 0.8 percent in his September projections. He signaled he would leave the benchmark rate unchanged until the middle of next year, saying domestic activity was “modest” and there is a risk global economic conditions deteriorate.

Rate Outlook

Eleven of 16 economists surveyed by Bloomberg News expect Bollard will keep borrowing costs unchanged until at least September. None expect an increase before June. There was a 24 percent chance of a rate cut next month, according to a Credit Suisse Group AG index based on swaps trading late yesterday.

The Organization for Economic Cooperation and Development last month cut forecasts for global economic growth in 2012 amid concern that the European debt crisis may damp global demand. Australia last week lowered its forecast for agricultural-export earnings, also citing Europe.

In the third quarter, the production-based measure of GDP was led higher by output from the retail and hospitality industries amid spending by 80,000 foreign visitors and local fans on dining, accommodation and souvenirs around the Rugby World Cup, which began Sept. 9. Retail trade rose 1.8 percent while accommodation and restaurant output increased 4.8 percent, the most since records began in 1987.

Factory Work

Manufacturing advanced 2.3 percent as meat and dairy production rose the most in nine years. Much of the increased output went into inventories, the statistics agency said.

Limiting growth, construction fell 2.2 percent, led by non- residential building and trade services. Farm production and forestry also declined.

Spending on food and other non-durable goods led a 1.5 percent gain in household consumption, the most since the first quarter of 2007, the statistics agency said.

Exports of goods, which make up 30 percent of the economy, declined 1.8 percent, led by dairy and meat, today’s report showed. Exports of services, which includes tourist spending in New Zealand, surged 7.2 percent. Imports rose 3.1 percent including fees paid to host the Rugby cup.

Investment fell 1.9 percent, as spending on residential buildings fell to an 18-year low. Business investment in fixed assets fell while spending on plant and machinery increased.

--Editors: Brendan Murray, Garfield Reynolds

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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