Manufacturing was at the forefront of the country's gross
domestic product (GDP) data yesterday, in line with analysts'
predictions and slightly ahead of Reserve Bank expectations.
Manufacturing activity is at its highest level in eight
years, with Otago-Southland leading the country's four
regions in expansion for several months.
For the first time in more than three and a-half years,
Reserve Bank governor Graeme Wheeler this month lifted the
interest-driving official cash rate (OCR) - from its record
2.5% low, to 2.75% - to quell inflation pressure.
He signalled the likelihood of a total 2% climb during the
next 24 months.
Statistics New Zealand (SNZ) GDP data said manufacturing
activity grew 2.1% for the quarter to December, driven by
increases in food, beverage, and tobacco, and machinery and
Annual growth was 2.7% and GDP was 3.1% higher than the
corresponding quarter a year earlier, giving credence to
further OCR hikes amid Reserve Bank concerns of rising
Dairy farming and dairy product manufacturing both fell
during the December quarter, following strong increases the
previous quarter, when milk production rebounded from the
drought in early 2013.
''While dairy activity fell this quarter, exports were up
strongly, as production from last quarter was sold
overseas,'' SNZ national accounts manager Michele Lloyd said.
Westpac chief economist Dominick Stephens, said the GDP data
was ''bang in line with expectations''.
''We're in a pervasive economic upswing owing to the
Canterbury rebuild, construction activity in Auckland,
consumer buoyancy following house price increases and a
four-decade high in the terms of trade,'' Mr Stephens said.
Council of Trade Unions economist Bill Rosenberg urged some
''Business investment, which drives jobs growth, had been
expected to be booming by this time but is looking
surprisingly weak,'' he said.
In December, Treasury had forecast 11.7% annual growth in
market investment by March 2014.
Business investment grew only 0.9% in the December quarter,
with only one good quarter growth, of 7.4% in June, during
2013, Mr Rosenberg said.
''But we have yet to see the results in sharply falling
unemployment and good wages growth,'' he said.
Mr Stephens said given the data, the Reserve Bank would have
to gradually increase the OCR over the course of the year,
which would slow the housing market, diminish consumer
buoyancy and eventually slow GDP growth.
''But this is a process that could take years,'' he said in a
Manufacturing grew 2.1% to $5.15 billion in the quarter, its
highest level since March 2006, and accelerating from 1.6%
expansion in the September quarter.
Dairy production fell in the quarter as inventories were run
down $18 million in the period, though other food, beverage
and tobacco manufacturing made up for the shortfall.
Transport equipment, machinery and equipment manufacturing
grew 6.2% in the period, BusinessDesk reported.
New Zealand's primary industries grew 0.3% led by a 9.5%
expansion in mining driven by exploration activity, while
agriculture shrank 1.6%, forestry contracted 0.6% and fishing
Business services shrank 2.1% in the quarter, driven by
slowing architectural and engineering work, which had been at
elevated levels in recent quarters to help prepare the $40
billion rebuild of Christchurch.
Construction activity grew 0.4% in the quarter as investment
in infrastructure made up for largely flat spending on
residential housing and a decline in non-residential work.