Agriculture industry driving GDP decline

Economic activity, as measured by gross domestic product (GDP), declined 0.3 percent in the March 2008 quarter in New Zealand, according to statistics found by Tootoo.com. The agriculture and construction industries were the main contributors to the decline this quarter. This follows an increase in economic activity of 0.8 percent in the December 2007 quarter. In annual terms, the economy grew 3.0 percent to the year ended March 2008.

Activity in the primary industries declined 4.1 percent in the March 2008 quarter. The agriculture industry was down 5.6 percent for the March 2008 quarter, the largest decline in agriculture since the March 1998 quarter. Drought conditions experienced by parts of the country contributed to lower output and increased costs (intermediate consumption) for the agriculture industry.

Activity in the goods producing industries was down 1.9 percent in the March 2008 quarter. The main drivers in the decline in the goods producing industries were construction (down 5.2 percent) and manufacturing (down 1.2 percent). Of the manufacturing industries the largest decline this quarter was in food, beverage and tobacco manufacturing. The decline in construction activity was in both residential and non-residential construction.

The expenditure-measure of GDP, which is released concurrently with the production-measure, declined 0.6 percent in the March 2008 quarter.

Gross fixed capital formation – which measures investment in fixed assets – declined by 2.0 percent in the March 2008 quarter. The main contributors to the decline in fixed asset investment this quarter were residential and non-residential buildings. Partly offsetting these decreases was increased investment in plant, machinery and equipment that was mainly sourced through imports.

Spending by New Zealand households was down 0.4 percent in the March 2008 quarter, following an increase of 0.5 percent in the December 2007 quarter. This is the first quarter since June 2004 that household consumption expenditure has been negative. Expenditure on durable items, such as vehicles and furniture and major appliances, were down 3.4 percent this quarter while volumes of non-durable goods, which includes food and alcohol, remained flat.