Asia Regional Integration Center

New Zealand grew by 1.5% in Q4 2017, slowing from 4.1% growth in Q3. Change in inventories was the biggest contributor to growth, adding 5.4 percentage points. Consumption added 3.0 points to growth, and fixed capital 2.1 points, while net exports subtracted 5.1 points. Retail sales expanded by 6.3% in Q4 2017, up from 6.0% in the previous quarter. The seasonally adjusted performance of manufacturing index decreased from 54.4 in January to 53.4 in February, staying above the threshold of 50 indicating expansion. The seasonally adjusted unemployment rate dropped marginally to 4.5% in Q4 2017, the lowest since 2008, from 4.6% in Q3. Pessimistic business sentiment persists, but signs of recovery in the housing market and higher consumer confidence could further increase private consumption, as signaled by higher retail sales. Expansion in manufacturing and lower unemployment at the start of this year support the expectation of a stable growth. FocusEconomics panelists forecast economic growth at 2.9% in 2018 and 2.7% in 2019 on expected expansion in government spending, continued record-low interest rates, and looser fiscal policy to maintain support for growth.