Monthly economic review: October 2014

10 Oct 2014

An overview of the New Zealand economy, including the latest data on economic growth, unemployment, inflation, merchandise trade and balance of payments figures, along with certain financial data.

Latest data and events

The economy grew by 0.7 percent in the June 2014 quarter, with an expansion in business services influencing growth. There was strong growth for both administrative and support services; and professional, scientific, and technical services over the quarter. Household consumption increased by 1.3 percent over the quarter, due to increased spending on durable goods (e.g. whiteware) and services. On an annual average basis, the economy expanded by 3.5 percent over the year ended June 2014.

New Zealand’s current account deficit totalled $5,798 million in the year ended June 2014, equivalent to 2.5 percent of gross domestic product (GDP). This compared with a deficit of $7,893 million in the June 2013 year (3.7 percent of GDP). The improvement in the deficit was driven by an increase in the goods balance, which was partially offset by a rise in foreign investor earnings on their New Zealand investments.

Fonterra announced that it was reducing its forecast payout for the 2014/15 season to $5.30 per kilogram of milksolids (kg/MS), down 70 cents from its previous forecast (excluding dividends). This compares with a payout in the 2013/14 season of $8.40 per kg/MS. Strong international milk production, Russia’s ban on dairy product imports from a number of countries, and high inventory levels in China were believed to be significant factors behind the current fall in international dairy product prices. Since the announcement, international dairy prices have fallen further.

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