Sector activity

This section covers building and construction activity in the economy, including the value of building consents and investment in buildings.

Forecasts of economic growth and industry output

The construction industry contracted in real terms, declining by 4.2 percent in real GDP in the year to March 2007. The construction sector employed 176,200 people in the September 2007 quarter. The trend for employment in the construction industry has been increasing since 2001 but fell significantly in the September 2007 quarter. This is consistent with a contraction in construction industry output, as evidenced by the June GDP data. 

A longer term view of industry conditions is provided by the Reserve Bank’s December 2007 Monetary Policy Statements. These Statements include forecasts which indicate that the Reserve Bank observed the housing market has slowed and expects upside risks of inflation to come from sharply rising oil prices, a substantial income boost for dairy farmers, the likelihood of future personal tax cuts and the rapid increase in global food prices.

Overall according to the December 2007 Monetary Policy Statement the Reserve Bank expects real investment (as measured by Gross Fixed Capital Formation) to rise by 4.3 percent during the March 2008 year. This rise is forecast to be followed by a rise of 2.7 percent in the March 2009 year, and 3.5 percent in the March 2010 year.

Construction industry growth and New Zealand's economic growth

In recent times the economy has grown relatively quickly. This growth, along with a rise in the population, has supported construction activity. The output of the construction industry is more volatile than the rest of the economy, rising and falling further in periods of economic growth and decline.

Output/growth annual percentage change

Economic output (year ended 31 March)	2000 % change	2001 % change	2002 % change	2003 % change	2004 % change	2005 % change	2006 % change	2007 % change
Growth - Gross Domestic Product (Nominal)	6.1%	5.7%	7.5%	5.1%	6.7%	6.6%	4.9%	4.7%
Real Growth - New Zealand Economy	5.3%	2.4%	3.8%	5.1%	3.5%	3.8%	2.7%	1.7%
Real Growth - Construction Industry	17.2%	-6.8%	5.5%	14.3%	8.2%	7.2%	3.6%	-4.2%
Real Growth - Residential Buildings	19.5%	-13.3%	2.0%	23.5%	14.5%	3.0%	-4.7%	-2.1%

^{Source: Statistics New Zealand}

The table below indicates the importance of the outputs of the residential building industry to the economy in recent years. Investment in residential buildings increased from 4.6 percent of expenditure on GDP in the March 2002 year to 6.8 percent in the March 2005 year, but dropped slightly to 6.7 percent in the March 2006 year.

Real Expenditure on Gross Domestic Product

Actual chain-volume series expressed in 1995/96 prices ($millions).

	Final Consumption Expenditure		Gross Capital Formation			Gross National Expenditure	Exports of Goods and Services	Less Imports of Goods and Services	Expenditure on Gross Domestic Product
	Private	General Government	Change in inventories	Residential Buildings	Other fixed assets
Annual (March years)
1999	60,071	17,799	393	4,886	16,321	99,435 (R)	30,356	29,367	100,386 (R)
2000	61,998 (R)	18,842	1,577 (R)	5,839	17,581 (R)	105,719 (R)	32,591	32,694	105,567 (R)
2001	62,885 (R)	18,472	1,197 (R)	5,061	18,544 (R)	106,025 (R)	34,649 (R)	32,478	108,128 (R)
2002	64,636 (R)	19,200	1,276 (R)	5,160	20,077 (R)	110,134 (R)	35,702	33,784	111,944 (R)
2003	67,914 (R)	19,457 (R)	1,174 (R)	6,375	20,742 (R)	115,452 (R)	38,503 (R)	36,216	117,668 (R)
2004	72,238 (R)	20,365 (R)	1,390 (R)	7,302	23,289 (R)	124,154 (R)	38,850 (R)	40,827	122,131 (R)
2005	75,988 (R)	21,160 (R)	1,550 (R)	7,520	25,423 (R)	131,077 (R)	40,663 (R)	45,910 (R)	126,129 (R)
2006	79,312 (R)	22,283 (R)	948 (R)	7,166	27,458 (R)	136,290 (R)	40,609 (R)	47,773 (R)	129,676 (R)
2007	81,220	23,199	3	7,014	26,521	137,303	41,837	47,085	132,334

^{(R) indicates a revised figure.}

^{Source:  Statistics New Zealand.}