NZ economy grows faster than forecast 0.7% in first quarter; kiwi dollar jumps

Thursday 16th June 2016

New Zealand's economy grew at a faster pace than expected in the first quarter of 2016 as construction expanded at the quickest rate in two years. The kiwi dollar rose after the data was released.

Gross domestic product expanded 0.7 percent in the three months ended March 31, from a 0.9 percent pace in the final quarter of 2015. That's ahead of the 0.5 percent forecast in a Reuters poll of economists, and the Reserve Bank's 0.6 percent estimate.

The Reserve Bank held off cutting interest rates at its meeting this month as it awaited more data on the economy, including today's report. Today's better-than- expected growth figures reduce the chances of an imminent cut. The kiwi dollar rose to 70.79 US cents, from 70.38 cents immediately before the figures were released.

Construction grew 4.9 percent in the latest quarter, the fastest quarterly rate since March 2014, with all construction industries showing growth and led by trade services and heavy civil engineering.

That reflects greater investment in construction, as investment in residential building rose 4.2 percent, non-residential building increased 4.4 percent and other construction advanced 12 percent, the highest quarterly growth rate since June 2014, due to increases in infrastructure such as roading and telecommunications.

On an annual basis, GDP grew 2.4 percent.

Rising demand for service industries saw service industries grow 0.8 percent in the quarter, led by health and retail trade. Healthcare and residential care rose 2.7 percent, the highest quarterly growth rate since June 2005, reflecting higher demand for services from a growing population.

Manufacturing declined 0.4 percent due to a drop in food, beverage, and tobacco manufacturing.

On an expenditure measure, GDP grew 0.5 percent in the March quarter, led by a 2.4 percent increase in fixed asset investment, due to increased investment in residential building and other construction. That lags behind expectations in a Reuters poll for a 0.6 percent gain in the quarter.

BusinessDesk.co.nz

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