Our take on the latest Gross domestic product (Thu 15 Dec 2022)
GDP rose 2.0% in the September quarter (seasonally adjusted)
Exports up 7.8% (seasonally adjusted)
Household spending fell 0.1% in September quarter (seasonally adjusted)
The key numbers...
- GDP increased 2.0% (seasonally adjusted) in the September 2022 quarter, vastly exceeding the expectations of a 0.8% gain from RBNZ. The strong economic growth in September was driven by strongly recovering tourism boosting exports, less of a hit than expected to household spending, and strong investment activity.
- The transport, postal, and warehousing industry had the strongest GDP growth in the September quarter, up 9.7%. The construction and health care industries also had strong economic growth in the September quarter, both increasing 5.1% from the three months ended June. Three industries experienced lower economic output in the September quarter, with the agriculture, forestry, and fishing industry down 1.7%, retail trade and accommodation down 0.7%, and public administration and safety down 0.5% (all figures seasonally adjusted). The health and public administration results are partially a result of compositional changes.
- Export volumes rose a considerable 7.8% in the September quarter, as a rebounding tourism sector resulted in a 26% boost to service exports compared to the June quarter. Strong exports of meat and dairy goods, up 15% and 25% respectively, also contributed to strong exports (all figures seasonally adjusted).
- Household spending eased 0.1% in the September quarter, driven by lower spending on services (down 0.7%). Consumption of non-durable and durable goods increasing 0.7% and 0.3%. Government spending also declined, down 1.4% in the September quarter (all figures seasonally adjusted).
- Private investment increased 2.7%, taking total investment activity up 3.3%. Investment rose across the board, with residential and non-residential building investment up 2.7% and 4.7% respectively, and infrastructure investment increasing 2.2%. Investment in transport equipment rose 14%, and plant, machinery and equipment (PME) increased 3.4% (all figures seasonally adjusted).
Components of expenditure GDP
Quarterly % changes
...and our reaction
- Today’s GDP figures suggest that the economy is running too hot as we operate beyond our means. The tourism sector looks frothy, with tourism-related sectors now above pre-pandemic levels despite tourist arrivals still recovering. Tourism activity is strong but likely unsustainable given the capacity constraints currently facing the sector.
- Household spending moved in the right direction in the September quarter but hasn’t responded swiftly enough to help get inflation under control. Household consumption of durable goods increased 0.3% from the June quarter, which suggests that either interest rate rises have yet to affect household budgets, or households have changed their expectations about inflation – both options mean higher interest rates are needed before inflation can be sufficiently tamed.
- The strength of investment in buildings and infrastructure highlights the frenzied level of work being completed by the construction industry, continuing to work through a backlog of building consents and renew aging infrastructure. Investment in transport equipment was also strong in September, as transport, postal, and warehousing activity continues to adapt to a post-COVID era where supply chain resilience is of the utmost importance.
- Although the headline economic strength looks worrying, underlying figures reinforce, but don’t change our view, that further interest rate increases are needed to tame activity and eventually inflation.
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