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NZ economy grows 0.6 percent in 2Q, led by milk production

Thursday 20th September 2012

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The New Zealand economy grew at a faster-than-expected clip in the second quarter, driven by record milk production and increased building activity, while growth in the first quarter was trimmed back.

Gross domestic product grew 0.6 percent in the three months ended June 30, from a 1 percent pace in the first three months of the year, a revision from the previously published 1.1 percent, according to Statistics New Zealand. Growth of 0.3 percent had been expected in the second quarter, according to a Reuters survey.

The economy tracked as the central bank expected in the second quarter, with growth matching the estimate in last week's monetary policy statement. The data has been subject to revisions because Statistics New Zealand has been overhauling its measures of GDP, in a staged change. As a result, GDP growth in the final two quarters of 2011 was revised up to 0.5 percent apiece from 0.4 percent.

The second quarter figures reflect a boom season for pasture growth that resulted in record production of milk, the basis of New Zealand's exports of dairy products. Added to that, the reconstruction of earthquake-damaged Christchurch is starting to stoke building activity.

"The good pasture conditions in the first half of the year continued to contribute to economic growth this quarter," the department's national accounts manager Rachael Milicich said. "We are also now seeing evidence of a rebuild in Canterbury following the earthquakes."

Agriculture was the largest contributor to economic growth in the latest quarter, rising 4.7 percent and contributing to a 3.6 percent gain in primary industries as a whole, which mainly reflected record milk production. Forestry and logging rose 5.5 percent

Construction grew 3.3 percent, the biggest quarterly gain since a 7.7 percent jump in the June 2010 quarter, driven by heavy and civil engineering such as roads and bridges, which is at its highest level since the series began in June 1987. Residential building activity grew 6.2 percent, reflecting work underway in Christchurch.

Transport, postal and warehousing grew 2.7 percent, the largest increase since the same pace of growth in March 2008.

Manufacturing grew 0.8 percent, following growth of 1.9 percent in the first three months of the year.

Electricity, gas, water and waste services fell 2.4 percent, the fifth straight quarterly decline.

The expenditure measure of GDP rose 0.3 percent, with gross capital formation rising 3.1 percent on increased investment in plant, machinery and equipment. Household consumption expenditure rose 0.2 percent, with gains in spending on durable goods, which rose by 1 percent, led by purchases of cars, motorbikes and bicycles. Household spending on services and on non-durables was flat in the latest quarter.

Exports of goods and services fell 1.2 percent, reflecting lower shipments of primary products. Imports fell 2.9 percent on lower imports of intermediate goods.

Gross fixed capital formation rose 3.1 percent. Residential building investment grew 5.7 percent, following a revised 0.9 percent gain in the first quarter. Business investment in fixed assets rose 2.8 percent, up from 2 percent in the first quarter.

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