G.D.P. up for first time in four quarters

Press, 8 November 1986, Page 9

G.D.P. up for first time in four quarters

By

MARTIN FREETH

in Wellington

A previous delay in meat industry killing and the spending boom before GST spurred economic activity in the three months to June, when gross domestic product grew for the first time in four quarters. The Statistics Department’s G.D.P. index showed 3.5 per cent growth in the June quarter, higher than expected and enough for one economist to predict yesterday that the over-all decline this financial year might be less than long forecast-

in the March quarter, the index slumped 2.3 per

cent, largely because of the national meat industry shortage for six weeks in that period.

Stock that should have been killed then was brought forward to inflate the level of activity in the next quarter. The national lamb kill in the June quarter, at 28.3 million head, was almost treble that of the previous three months.

That contributed to an 11.5 per cent rise in the manufacturing sector component of G.D.P. and a 1.5 per cent rise in the transport and servicing sector.

The rise in manufacturing activity contrasted sharply with a 7.4 per

cent drop in the March quarter.

In the June quarter, agricultural activity is estimated to have increased 5.6 per cent, and that in the trade, restaurants and hotel industries, 2.9 per cent.

Mr Peter Keenan, an economist at Jardens sharebrokers in Wellington, suggested the G.D.P. growth reflected more than the disrupted killing season and the rise in consumer demand ahead of GST, and the widely forecast slump in G.D.P. for the 1986-87 year might turn out to be only 0.5 per cent. Forecasters have

earlier said it will be a G.D.P. decline of 1.5 or 2 per cent.

The Minister of Finance, Mr Douglas, also argued yesterday that the June quarter result showed the economy to be basically resilient as well as reflecting the pre-GST boom and meat kill.

"It goes a long way to disprove the comments of the gloom merchants over recent months,” Mr Douglas said.

He found the figure "encouraging” and consistent with his policy objectives.

Mr Keenan said the relatively strong growth was consistent with the continued high level of the balance-of-payments deficit and the apparent holding up of consumer spending in spite of the introduction of GST.

The Opposition spokesman on finance, Mr George Gair, disputed that the G.D.P. growth was anything other than a "hiccup” in a downward trend. Mr Gair said there was no underlying strength in economic activity, although the September G.D.P. movement would probably also benefit from the level of spending before GST.

The index showed no increase in the September and December quarters of last year. The annual rate of decline in G.D.P. has been falling since peaking at 8 per cent in December, 1984. In the June quarter, the annual average growth in G.D.P. was down to 0.9 per cent Mr Keenan suggested the further decline could be moderated if demand did not fall because of GST as much as was earlier thought.