New Zealand’s economy unexpectedly contracted in the third quarter and moved closer to a recession as the worst earthquake in eight decades slowed housing and manufacturing.
Gross domestic product fell 0.2 percent in the three months ended Sept. 30, the first drop since early 2009, from a revised 0.1 percent gain the previous quarter, a Statistics New Zealand report showed in Wellington today. The median forecast of 15 economists surveyed by Bloomberg News was 0.1 percent growth.
The country’s currency fell as rising risks of a recession bolster the case for central bank Governor Alan Bollard to keep interest rates unchanged until at least the second quarter next year. Finance Minister Bill English today said growth will accelerate next year, buoyed partly by the country hosting the Rugby World Cup finals, and keep the recovery intact.
“Post-earthquake reconstruction work, higher export volumes and elevated commodity prices, and the positive economic effects related to the Rugby World Cup,” will help growth in 2011, said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney.
New Zealand’s dollar fell as low as 73.86 U.S. cents from 74.12 cents before the data. It bought 74.23 cents at 12:37 p.m. in Wellington.
The economy grew 1.5 percent in the third quarter from a year earlier, less than the 1.8 percent median estimate in a Bloomberg survey of 14 economists. Annual average growth, a measure forecast by the central bank, was 1.4 percent, today’s report showed.
Quake Effects
A magnitude 7 temblor that struck Canterbury province on Sept. 4 disrupted retail spending and transportation, and destroyed inventories at retailers and manufacturers.
In the third quarter, the production-based measure of GDP was hurt by a contraction in manufacturing and homebuilding while farm and mining output also declined, today’s report showed.
Manufacturing slumped 1.7 percent, led by petroleum and chemical products, machinery and lumber. Output from the construction industry fell for the first time in a year, declining 2.5 percent, led by homebuilding.
Mining fell 6.9 percent and farm output dropped 1 percent as livestock production fell.
Exports, Spending
Growth was also led lower by a decline in exports, while consumer spending rose for a sixth quarter after a surge in demand for electrical goods and furniture immediately before the Oct. 1 increase in the sales tax.
Exports, which make up 30 percent of the economy, fell 1.1 percent, as meat, dairy and lumber shipments declined, the report showed. Consumption rose 0.5 percent, led by demand for appliances and other non-durable goods. Spending on air travel and communications also increased.
“I’ve said all along this recovery would be a bit bumpy at times and that’s proved to be the case,” English said in an e- mailed statement. “The recovery remains on track. I am quite confident the economy will build momentum in 2011 and beyond.”
English said prospects for rising export prices and employment will underpin growth, as will spending, as the nation hosts the Rugby World Cup finals starting in September.
Unemployment was 6.4 percent in the third quarter, down from 6.9 percent the previous three months and little changed from 6.5 percent in the same period a year earlier, the statistics agency said Nov. 4.
More ‘Robust’
Bollard on Dec. 9 kept the benchmark interest rate at 3 percent and said it seemed “prudent to keep the cash rate low until the recovery becomes more robust.”
Five of 12 economists surveyed on Dec. 10 by Bloomberg News expect Bollard will keep the official cash rate at 3 percent until the April-to-June period, and three forecast the next boost will happen after June 30. Four predict a move in the first three months of the year.
Bollard predicted a 0.3 percent expansion in the third quarter from the previous three months before reports that showed manufacturing sales and homebuilding declined during the period. He lowered his 2010 forecast for annual average growth to 2.6 percent from 3.1 percent.
The economy shrank for the first time since the first quarter of 2009, which was the end of five straight quarterly contractions as the global credit crisis contributed to the nation’s worst recession in three decades.
Past Recession
Growth returned through the middle of 2009, buoyed by a housing recovery and demand for the nation’s commodity exports from China and Asia. Still, the pace of expansion slowed as consumers and companies preferred to reduce debt rather than spend or invest.
The magnitude 7 earthquake that rocked Christchurch city and surrounding districts on Sept. 4 curbed retail spending and manufacturing in the final month of the quarter as offices and factories closed, the central bank said Dec. 9.
The Reserve Bank of New Zealand has estimated the cost of the rebuilding will be at least NZ$5 billion ($3.7 billion) spread mainly over 2011 and 2012.
Sales at Smiths City Group Ltd., a Christchurch-based furniture and appliances retailer, fell 12 percent in the three months ended Oct. 31 from a year earlier, it said on Nov. 4. Roads around its central city store were partly or completely closed, the company said in a statement sent to the stock exchange.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net
To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net