Building boom spurs New Zealand economic growth

Statistics New Zealand (SNZ) reported gross domestic product (GDP) expanded 0.9 percent in the second quarter, just below market expectations of 1.1 percent.

The data means annual growth for the year to June 30 was 3.6 percent, a rate Finance Minister Bill English said was the third highest in the developed world.

“Despite the tough period the dairy industry has been through, we are in the unusual position of enjoying solid growth, rising employment and real wages at the same time as very low inflation,” he said.

The economy’s standout performer was the construction sector, up 5.0 percent in the quarter after a 5.1 percent rise in the previous three-month period.

But SNZ reported strength across the board, with growth in 11 of the 16 industries it uses to measure GDP.

Annual inflation was 0.4 percent in the second quarter and has remained below the central bank’s 1.0-3.0 percent target for seven quarters.

Despite this, the Reserve Bank of New Zealand cut interest rates to a record low of 2.0 percent last month and markets are predicting more easing in a bid to spur further growth.

Capital Economics Australasia chief Paul Dales said the latest figures took the pressure off the Reserve bank for an immediate cut at its September 22 meeting.

“(But) we still believe that low inflation will prompt the RBNZ to cut interest rates to 1.75 percent in November and perhaps 1.5 percent next year,” he said.

The New Zealand dollar fell 0.15 US cents to 72.71 US cents after the data release.

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