New Zealand Posts Broad-Based Quarterly Growth
Published: Wednesday, 19 Sep 2012 | 8:57 PM ET
By: Reuters
New Zealand's economy grew faster
than expected in the June quarter as strong agricultural production and a
pick-up in Christchurch's earthquake rebuild drove activity, but record low
interest rates are seen continuing well into next year.
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Statistics New Zealand said on
Thursday gross domestic product grew a seasonally adjusted 0.6 percent in the
quarter, against the 0.3 percent forecast in a Reuters poll and the central
bank's 0.4 percent projection.
Activity slowed from the stellar
1.0 percent expansion in the March quarter, with reconstruction activity in
quake-hit Christchurch lifting the building sector.
But the still-uneven outlook, soft
inflation, and global uncertainty suggested that the Reserve Bank of New Zealand
(RBNZ) would be unlikely to raise its key rate from the current record low 2.5
percent for some time.
"It doesn't mean that much for the
RBNZ because there's still plenty of spare capacity in the economy. There's room
for a lot more growth before they have to do anything on rates," said RBC
strategist Michael Turner.
The New Zealand dollar
[NZD= 0.8294 
0.0004 (+0.05%)
]
rose nearly half a cent to $0.8300 from $0.8256 before the data,
while interest rate futures fell as much as 5 points.
0.0004 (+0.05%)
]
rose nearly half a cent to $0.8300 from $0.8256 before the data,
while interest rate futures fell as much as 5 points.
The latest Reuters poll shows a
majority of the 17 analysts expect the next RBNZ move to be a rise in the second
half of next year, with three looking at early 2013 and three at an early 2014
move.
Financial market pricing based on
interest rate swaps implies a 11 percent chance of a rate cut next month and 10
basis points of cuts over the coming 12 months because of an uncertain global
outlook.
New Zealand's annual growth rate
pushed up to 2.6 percent, easily outperforming falls of 0.2 percent in the euro
zone and 0.5 percent in Britain, and 2.3 percent growth in the United States,
but trailing neighboring Australia's 3.7 percent.
The dairy sector remained the
powerhouse of New Zealand's $169 billion economy, with good weather boosting
agriculture sector growth a record 4.5 percent.
The retail sector bounced back as
the housing market picked up, helping consumer confidence.
Domestic consumption, which makes
up around 60 percent of the economy, gained 0.2 percent, after a paltry 0.1
percent in the previous quarter.
There was also a solid 3.3 percent
rise in construction sector activity, which was put down to increased
post-earthquake reconstruction.
"There's no need to debate anymore
about the Christchurch rebuild, that's absolutely underway now. New Zealand is
going into a bulge of stronger GDP growth fuelled by the Christchurch rebuild,"
said Westpac chief economist Dominick Stephens.
The Reserve Bank of New Zealand
has forecast annual growth to accelerate to over 3 percent by the middle of next
year as the rebuilding of Christchurch picks up.
Copyright 2012 Thomson Reuters. (Xavier Sherrod)
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