Economy slows less than expected

Stats NZ says the fall was 3.7% for the quarter, due to the impact of the Covid lockdown.

However it was a smaller fall than most market analysts were expecting, with a 4.1% fall widely forecast.

And strong figures earlier in the year, including a good second quarter result, helped overcome the latest slide.

Stats NZ says the impact of the Covid lockdown was greater in some sectors than in others.

“The four industries with the largest falls in activity were retail, accommodation, and restaurants; manufacturing; construction; and arts and recreation, as they were the most affected by lockdown measures,” said a senior Stats NZ manager, Ruvani Ratnayake.

“The falls in production were mirrored by corresponding falls in household consumption expenditure and investment expenditure, which fell by 7.5 percent and 5.3 percent respectively.

“Households spent less on services such as eating out, accommodation, and domestic travel, and less on durable items such as clothing, motor vehicles, furniture, and audio-visual equipment,” Ms Ratnayake said.

Commentators have reacted favourably to the results. Jane Turner of ASB said third quarter GDP was just 0.4% lower than it was last year – a “phenomenal result. This reflects the underlying momentum heading into the lockdown and the resilience of the New Zealand economy,” she said.

Westpac says the fall was actually bigger than it expected but it too saw strength, and forecast a recovery in subsequent quarters.

In another comment, Kiwibank called this contraction “purely mechanical” and did not reflect underlying demand. It foresaw a rebound in the fourth quarter.