N.Z. Manufacturing, Construction Add to Fourth-Quarter Growth

March 8 (Bloomberg) -- New Zealand manufacturing sales increased the most since 2002 in the fourth quarter and home building surged, adding to signs economic growth accelerated in the final months of last year.

Sales volumes adjusted to remove inflation rose 3.1 percent from the previous three months, Statistics New Zealand said in a statement in Wellington today. Residential construction increased 7.4 percent in the same period, the statistics agency said in a separate report.

Stronger construction, manufacturing and retail sales suggest economic growth accelerated in the fourth quarter, buoyed by record-low interest rates and an expansion in Australia, which is the biggest market for New Zealand’s exports. The Treasury Department last week said the currency’s 3.7 percent decline against the U.S. dollar so far this year is providing more confidence for exporters.

“Construction and manufacturing look set to provide a positive contribution to gross domestic product in the quarter,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland. He estimates the economy grew 1 percent in the three months ended Dec. 31.

New Zealand’s dollar bought 70.01 U.S. cents at 11:55 a.m. in Wellington trading from 69.54 cents immediately before the reports were published.

Economic growth is accelerating after GDP increased 0.2 percent in both the second and third quarters of 2009, ending the nation’s worst recession in three decades. Fourth-quarter GDP figures are published on March 25.

Export Volumes

Economists will complete their GDP forecasts after a report on export and import volumes on March 10 and data on electricity generation due a week later. Retail sales rose 1 percent in the fourth quarter, according to a report on Feb. 12.

Reserve Bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since April last year. He will leave the rate unchanged at his next review on March 11, according to all 13 economists surveyed by Bloomberg News.

Manufacturing sales rose in the three months through December by the most since the third quarter of 2002, when volumes jumped 4.1 percent. Eleven of 15 industries recorded gains, the statistics agency said.

Meat and dairy sales advanced 4.6 percent, led by meat. That offset a fall in milk powder, butter and cheese volumes. More than half the meat and dairy production is exported, the statistics agency said.

Excluding those categories, manufacturing climbed 3.6 percent, the agency said. Analysts use the figure excluding meat and dairy as a guide for the contribution of manufacturing to New Zealand’s GDP.

GDP Contribution

“Adjusting for changes in inventory levels, we estimate that manufacturing production rose around 4 percent” in the quarter, said Borkin. “This emphasizes a turn in performance after a period of significant weakness.”

Before the latest period, manufacturing had declined for five of seven quarters.

Demand for exports is being buoyed by global growth, led by China and other Asian economies. In Australia, which buys 23 percent of New Zealand exports, growth was 0.9 percent in the fourth quarter.

The increase in home construction followed two quarters of declines, while non-residential construction fell 6.1 percent, the statistics agency said in a second report.

“We expect residential construction activity will continue to recover over the coming quarters,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. “Non residential was significantly weaker than our expectation.”

Construction lags behind home-building approvals, which surged 21 percent in the fourth quarter from the three months through September, according to a report on Jan. 29.