(Bloomberg) — New Zealand’s economy grew more than twice as much as economists expected in the second quarter, while a revision to the previous quarter showed the country was not in recession.
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Gross domestic product rose 0.9% in the three months to June, Statistics New Zealand said in Wellington on Thursday, stronger than the 0.4% forecast by economists. First-quarter GDP was revised to unchanged from a 0.1% decline, meaning the economy did not contract for two straight quarters and narrowly avoided a technical recession.
The surprising economic data is some consolation for the ruling Labor Party, which is well behind in opinion polls barely three weeks before the general election. While Prime Minister Chris Hipkins argues the economy has reached a turning point, some analysts expect it to weaken again later this year as high interest rates curb household spending.
The New Zealand dollar was little changed after the GDP release, trading at 59.31 US cents at 11:21 a.m. in Wellington. Bond yields rose and investors increased their bets that the Reserve Bank may need to raise interest rates again to curb inflation.
“It remains to be seen whether inflation pressures will ease quickly enough to satisfy the RBNZ,” said Darren Gibbs, senior economist at Westpac in Auckland. “We believe today’s data increases the likelihood that the RBNZ will at some point feel the need to respond to the slight tightening bias it signaled last month.”
In August, the RBNZ reiterated that it was done raising rates, but its forecasts showed a low risk of another rate hike in the next 12 months. That forecast assumed the economy would grow again in the three months to June before contracting again in the third and fourth quarters of this year.
Rising immigration contributes to economic growth. New Zealand added a record 92,600 net residents in the year to June, boosting demand for rental properties and homes.
Still, economic growth is outpacing population growth, with GDP per capita rising 0.2% in the second quarter, according to today’s report.
Compared to the previous year, the economy grew by 1.8%, more than economists’ average forecast of 1.2%.
Other details
According to the statistics agency, the expansion in the second quarter was driven by service sectors such as real estate and public administration.
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Services industry production increased 1% compared to the first quarter
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Manufacturing rose 0.9%, the first increase in six quarters
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Construction fell 0.2%
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Primary industry production fell by 1.9%, led by fishing and forestry
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Investments fell by 4.3%
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Private household consumption rose by 0.4%
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Exports rose 5% as milk shipments increased while tourist numbers increased
– With support from Ainsley Thomson.
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