Rugby’s Boost to Growth May Fade With New Zealand Holding Rates: Economy

New Zealand’s economy grew faster than analysts estimated last quarter on Rugby World Cup spending, a boost the central bank may look past as it awaits more lasting recovery signs before raising record-low interest rates.

Gross domestic product rose 0.8 percent in the three months ended Sept. 30 from the previous quarter, when it increased 0.1 percent, Statistics New Zealand said in a report released today in Wellington. Growth was faster than the 0.6 percent median projection in a Bloomberg News survey of 14 economists.

Investors bet Reserve Bank Governor Alan Bollard will see the tourism windfall as a temporary lift and hold the official cash rate at 2.5 percent until late next year, as the central bank forecasts a stronger recovery in 2012 on rebuilding of earthquake-devastated Christchurch. Deutsche Bank AG economist Darren Gibbs pushed back his prediction for Bollard’s next increase to September from June today.

“We can expect a softer run of GDP numbers over the next few quarters as the Rugby World Cup impact washes out of the data,” said Mark Smith, an economist at ANZ National Bank Ltd. in Wellington. “We continue to look for a December 2012 start to the tightening cycle, barring a global meltdown.”

New Zealand’s dollar fell after the data. It bought 76.83 U.S. cents as of 1:41 p.m. in Wellington from 77.08 cents immediately before the report. The currency known as the kiwi is down 13 percent since Aug. 1 when it reached 88.43 cents, the highest level since exchange-rate controls were removed in 1985.

Weaker Confidence

Since New Zealand won the rugby tournament Oct. 23, reports have shown business and consumer confidence have weakened as the European debt crisis and construction delays inhibit a rebound from an earthquake that rocked the country’s second-biggest city in February. Reports showed manufacturing contracted in October and November.

New Zealand’s growth “was achieved against a backdrop of global uncertainty,” Finance Minister Bill English said in an e-mailed statement. “We face challenges from increasingly volatile global financial markets, reduced demand for our products in some markets and a high kiwi dollar.”

Asian stocks snapped a two-day rally as lenders sought more cash from the European Central Bank than economists had expected, reducing optimism that the region’s debt crisis will be contained. The MSCI Asia Pacific Index lost 0.4 percent to 112.80 as of 9:38 a.m. in Tokyo, with almost two shares falling for each that rose.

Japan’s Outlook

Elsewhere in the Asia-Pacific region, Japan’s Cabinet Office is due to release its estimate for growth for the year starting April 2012 after a meeting at 3 p.m. Tokyo time. A report on Taiwan’s unemployment rate is expected to show it was little changed at 4.31 percent in November, according to the median estimate of nine economists surveyed by Bloomberg.

In Europe yesterday, a report showed consumer confidence dropped more than economists forecast in December to the lowest in more than two years, adding to signs of a deepening economic slump in the 17-nation bloc. An index of household sentiment in the single-currency area fell to minus 21.2 from minus 20.4 in November, the Brussels-based European Commission said in an initial estimate.

In the day ahead, a report may show U.K. gross domestic product expanded 0.5 percent in the third quarter from the April-June period, according to the median estimate of economists surveyed by Bloomberg, unchanged from a previously reported growth rate for the third quarter.

American Consumers

In the U.S., a Commerce Department report may show GDP climbed at a 2 percent annual rate from July through September, unchanged from a Nov. 22 estimate. American consumer confidence may have risen for a fifth straight month, according to the median estimate in a Bloomberg survey before the Thomson Reuters/University of Michigan’s final estimate for December.

New Zealand’s economy grew 1.9 percent in the third quarter from a year earlier, less than the 2.2 percent year-on-year pace estimated by economists. Growth in the fourth quarter of 2010 and the first quarter this year was revised lower after updated data on metal product manufacturing, the report showed.

Bollard on Dec. 8 forecast a third-quarter expansion of 0.6 percent, down from 0.8 percent in his September projections. He signaled he would leave the benchmark rate unchanged until the middle of next year, saying domestic activity was “modest” and there is a risk global economic conditions will deteriorate.

Most of the 16 economists surveyed by Bloomberg News expect Bollard will hold borrowing costs until at least September. There was a 22 percent chance of a rate cut next month and no possibility of an increase seen until at least December next year, according to a Credit Suisse Group AG index based on swaps trading today.

Global Slowdown

The Organization for Economic Cooperation and Development last month cut forecasts for global economic growth in 2012 amid concern that the European debt crisis may damp demand.

In the third quarter, the production-based measure of New Zealand’s GDP was led higher by output from the retail and hospitality industries amid spending by 80,000 foreign visitors and local fans on dining, accommodation and souvenirs around the Rugby tournament, which began Sept. 9. Retail trade rose 1.8 percent while accommodation and restaurant output increased 4.8 percent, the most since records began in 1987.

Manufacturing advanced 2.3 percent as meat and dairy production rose the most in nine years. Much of the increased output went into inventories, the statistics agency said.

Limiting growth, construction fell 2.2 percent, led by non- residential building and trade services. Farm production and forestry also declined.

Spending on food and other non-durable goods led a 1.5 percent gain in household consumption, the most since the first quarter of 2007, the statistics agency said.

Exports of goods, which make up 30 percent of the economy, declined 1.8 percent, led by dairy and meat, today’s report showed. Exports of services, which include tourist spending in New Zealand, surged 7.2 percent. Imports rose 3.1 percent including fees paid to host the Rugby cup.

Investment fell 1.9 percent, as spending on residential buildings sank to an 18-year low. Business investment in fixed assets dropped while spending on plant and machinery increased.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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