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New Zealand Third Quarter GDP Slows More Than Expected

Wilfried Krecichwost | The Image Bank | Getty Images

New Zealand's economy grew at its weakest rate in nearly two years during the September quarter as falling manufacturing and agricultural output offset a surge in construction, but analysts said it was unlikely to prompt a rate cut.

Gross domestic product rose a seasonally adjusted 0.2 percent in the quarter, half of market expectations but in line with the forecast of the Reserve Bank of New Zealand (RBNZ), data from Statistics New Zealand showed on Thursday.

Second-quarter growth was halved to 0.3 percent from 0.6 percent as the statistics agency updated its methodology.

The slowdown was seen as a stumble and not likely to change the central bank's rates thinking.

"It was a touch softer than market expectations, but the broad story seems to be one of the soft patch we expected in September," said First NZ Capital head of research Chris Green. "Given that the data was in line with the Reserve Bank expectations... we still think the Reserve Bank is going to raise rates in March 2014."

Partial indicators in the December quarter have pointed to some stronger activity as the rebuild of earthquake-damaged Christchurch has picked up, which is set to boost next year's growth. That, and reduced global risks, have seen financial markets have all but price out the chance of a rate cut.

The New Zealand dollar fell to $0.8330 from $0.8360. Interest rate futures prices rose as much as 5 points as investors pushed out the timing of rate rises.

A Reuters poll of 16 analysts before the GDP data showed the median forecast is that rates will be held at a record low of 2.5 percent until the fourth quarter of 2013, when the RBNZ is expected to start increasing them.

New Zealand's annual growth of 2.0 percent was lower than Australia's 3.1 percent and the United States' 2.5 percent, but stronger than Canada's 1.5 percent. The UK barely grew, while the EU economy contracted by 0.6 percent.

In the September quarter, building work rose substantially due to the rebuilding in Christchurch. A strong housing market also lifted the sector, with record prices in Auckland cheering the industry.

But retail sales volumes were weak, with consumers cautious as unemployment rose to the highest in more than 13 years.

Agricultural output slowed, after a big lift in the first half with the help of excellent grazing conditions.

Inventories were also run down in the manufacturing and agriculture sectors, pointing to a build-up in the fourth quarter.

Contact Asia Economy

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