New Zealand’s economic growth slowed less than economists forecast last quarter amid stronger farm output and construction, bolstering a local currency that’s the strongest among major developed nations this year.
Gross domestic product rose 0.6 percent in the three months ended June 30 from the previous quarter, when it expanded a revised 1 percent, Statistics New Zealand said in a report released today in Wellington. Growth was stronger than the central bank’s 0.4 percent projection, which was also the median estimate in a Bloomberg News survey of 10 economists.
A sluggish recovery and weak inflation add to the case for no change in interest rates after the central bank last week signaled the official cash rate, which has been at a record-low 2.5 percent since March last year, may remain unchanged for another 12 months. The New Zealand dollar’s 6.8 percent increase this year dims growth prospects for exporters as incoming Reserve Bank Governor Graeme Wheeler begins his tenure starting Sept. 26.
“The economy ended the first half of the year with a reasonable degree of momentum,” said Mark Smith, senior economist at ANZ National Bank Ltd. in Wellington. “The considerable uncertainties over the future outlook are likely to maintain a high hurdle to cash rate moves, with the RBNZ in no hurry to move.”
New Zealand’s dollar rose against the U.S. currency after the data. It bought 82.84 U.S. cents as of 11:50 a.m. in Wellington from 82.54 cents immediately before the result.
The economy expanded 2.6 percent in the second quarter from the year-earlier period, the report showed, faster than the 2.3 percent growth estimated by economists.
The central bank on Sept. 13 forecast annual growth of 2.4 percent for the second quarter. It expects growth will be 2.7 percent for the full calendar year and 3.1 percent in 2013. It also predicted annual inflation will average less than 2 percent over the next two years.
Solid Energy New Zealand Ltd., the state-owned coal miner, last month said it will cut spending and fire about 140 workers as global coal prices fall. Rio Tinto Group this month said it will cut 100 jobs at its New Zealand aluminum smelter, citing difficult economic conditions and weak prices.
“From the government’s perspective, we cannot influence these external events which are having an impact on New Zealand,” Finance Minister Bill English said in an e-mailed statement. “We are making good progress and the outlook is for further moderate growth over the next three or four years.”
The second-quarter expansion was led by farm production amid favorable weather conditions that helped increase milk production, today’s data showed. Farm output rose 4.7 percent in the second quarter following a 2.7 percent gain in the January- March period.
Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, said in August that its May-to-July shipments were a record after indicating in May that milk collection was 10 percent higher than a year earlier.
Construction rose 3.3 percent, led by a record increase in building roads and bridges, the statistics agency said. Residential building also gained, boosted by Christchurch repairs, while non-residential construction is at the lowest since 2003. Much of the country’s third-largest city was devastated by an earthquake in February 2011.
Manufacturing rose 0.8 percent led by machinery and equipment assembly. Air transport increased as did professional and business services, which includes legal and advertising. Real estate services gained as more house sales were completed, the agency said.
The expenditure measure of GDP rose 0.3 percent in the quarter, led by investment, today’s report showed.
Investment rose 3.1 percent, led by a rise in business investment in fixed assets, primarily plant and equipment. Residential housing investment rose for a fourth straight quarter, the agency said.
Household spending gained 0.2 percent as purchases of appliances, vehicles and other durable goods rose. Purchases of food and other non-durables were little changed, as was spending on services, the agency said. Spending by residents traveling overseas declined.
Exports of goods, which make up 30 percent of the economy, fell 1.2 percent, led by dairy and seafood, today’s data showed. Still, net exports added to growth because imports fell 2.9 percent.
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