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New Zealand's Q2 GDP slightly misses expectations

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New Zealand's economy grew slightly less than expected in the second quarter but the solid output figures, bolstered by strong export and domestic demand, may temper rate cut expectations.

Gross domestic product rose a seasonally adjusted 0.9 percent in the second quarter versus the prior quarter and 3.6 percent on the year, Statistics New Zealand said on Thursday.

Economists polled by Reuters expected 1.1 percent growth on the quarter and 3.7 percent on the year.

"Household spending was up 1.9 percent, with Kiwis spending more on going away, eating out, and furnishing their houses," said Statistics New Zealand National Accounts Manager Gary Dunnet.

Strong international demand saw exports increase 4.0 percent, with exports of goods posting the biggest quarterly increase in nearly 20 years, Statistics New Zealand said.

New Zealand Finance Minister Bill English said the country's annual growth rate of 3.6 percent was more than double the OECD rate of 1.6 percent, and compared with 3.3 percent in Australia, 2.2 percent in the United Kingdom, 1.2 percent in the United States and 0.8 per cent in Japan.

The strong GDP picture, especially since it was partly driven by household spending, may temper expectations of further interest rate cuts from the Reserve Bank of New Zealand (RBNZ).

The RBNZ cut its official cash rate by 25 basis points to a record low 2.0 percent in August to stave off deflation and restrain the rising New Zealand dollar. It said further policy easing was likely.

ASB Chief Economist Nick Tuffley said while GDP was slightly lower than anticipated it was higher than the Reserve Bank had expected.

"We still think the Reserve Bank will cut (the cash rate) in November but the threshold for cutting beyond that may be slightly higher," he said.