Just as China and strong government spending has kept Australia out of a recession, that combination has arrived to help the Kiwi economy escape, faster than most forecasts predicted, its worst slump in 30 years.
Figures out this morning across the Tasman show the Land Of The Long White Shroud has emerged from more than a year of recession to edge back into the black in the June quarter, thanks to the export of more logs to China (and that doesn’t mean shipping All Black players north to give the Wallabies a better chance of winning next year).
Although a couple of analysts had tipped the economy to pick up in the June quarter, the news of positive growth of 0.1% in the three months came as a surprise to the market.
Only two economists in the Bloomberg survey had expected the economy to grow. Bloomberg said this morning its survey of analysts ahead of the release of the June quarter GDP figures from Statistics New Zealand had seen a median forecast of a fall of 0.2% in the quarter.
The news will come as a surprise to the country’s Treasury and Reserve Bank, which had both seen the rate of activity picking up and they forecast the economy to emerge from its contraction later this year in the third or fourth quarter, not the second quarter.
RBNZ Governor Alan Bollard forecast in a statement on September 10 (after a rate meeting) that the economy shrank 0.1% in the second quarter and would grow 0.1% in the three months to September. The Treasury Department said on September. 7 that a “small” second-quarter contraction would mark the end of the recession.
But it got there a quarter quicker, although the rise of 0.1% was nothing outstanding, but it was positive nevertheless. However the economy was still down 2.1% from the June quarter of 2008.
Higher consumer spending and exports of logs and dairy products (where prices continue to rise) were given as major factors, especially the higher shipments to China.
“Activity in the primary industries was up 1.5% in the June 2009 quarter, mainly driven by forestry and logging (up 8.0%). The increase in forestry and logging production was related to an increase in exports of logs to the People’s Republic of China.”
“Export volumes were up 4.7% in the June 2009 quarter, with exports of dairy and wood products the main contributors.
“Import volumes decreased 3.8% in the same period, with the largest declines in intermediate goods, and machinery and plant equipment.
“The combination of higher exports, lower imports, and a decline in manufacturing led to a large, $1.1 billion run down in inventories.
“Activity in the goods-producing industries contracted 0.5% in the June 2009 quarter. The manufacturing (down 1.3%) and construction (down 1.9%) industries both declined. A 5.9% increase in electricity, gas and water partly offset these declines.
“Activity in the services industries was flat this quarter. Service industries that increased were real estate and business services (up 1.5%) and communications (up 1.7%). Offsetting these increases were declines in wholesale trade (down 2.1%), transport and storage (down 3.3%), and government administration and defence (down 0.4%).
“Household consumption expenditure, which measures the volume of spending by New Zealand households, was up 0.4%. This increase in household spending was driven by non-durables (mainly motor fuel) and services. Household spending on durable items fell,” Statistics NZ said.
The country is seeing an upturn in housing activity, higher retail sales and a lower trade deficit, thanks to the lower level of activity in the economy.
But the best indicator seems to be a turnaround in immigration, which is now positive, instead of the long drain of people leaving the country, mainly for Australia.
That has changed as more Kiwis in Australia return, possibly because of the downturn in job prospects here.
Unemployment however remains higher in NZ at 6.0% (a nine-year high), than in Australia at 5.8%.