New Zealand has a

Wednesday 18th March 2015

New Zealand has a "two speed" economy as strong domestic demand cushions a weaker export sector, according to Moody's Analytics.

GDP data due tomorrow will probably show New Zealand's economy expanded 0.8 percent in the fourth quarter of last year, said Faraz Syed, an associate economist at Moody's Analytics, a division of Moody's Corp which is independent of the credit ratings service.

"Dry weather weighed on exports and production, though the domestic economy continued to tick along," Syed said in a note. "This supports our view that New Zealand's economy is growing at two speeds, with strong domestic demand offsetting a weak external sector."

Unfavourable weather conditions have hurt dairy producers the past six months, compounding the pain from slowing Chinese demand, while meat exports are being squeezed by lower prices as slaughter counts increase in dry weather, Syed said. Still, he said strong domestic demand is supporting GDP growth, underpinned by a burgeoning retail sector, firm home sales, a resilient labour market and robust inward migration.

The reconstruction of earthquake devastated Canterbury is providing an additional boost to the local economy, he said.

New Zealand's GDP data will be released tomorrow at 10.45am.

A Reuters poll of economists shows the nation's GDP is expected to show a quarterly gain of 0.7 percent for an annual 3.2 percent growth rate. That would mark a decline from the third quarter's 1 percent expansion, which some economists say was exaggerated by a jump in mining activity and dairy production.

BusinessDesk.co.nz

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