New Zealand's economy surges on consumer, building boom

Workers stand near a crane at a construction site in front of the Sky Tower in Auckland, New Zealand, on Friday, Dec. 9, 2016.
Brendon O'Hagan | Bloomberg | Getty Images

New Zealand's economy surged ahead in the third quarter of the calendar year as consumers spent with abandon while homebuilding and tourism boomed, cementing expectations the country's central bank was done cutting interest rates.

Official data on Thursday showed gross domestic product rose 1.1 percent, above economists' forecast of a gain of 0.9 percent, putting it among the rich world's fastest growing developed nations.

That was the fifth straight quarter of growth at 0.7 percent or more. The annual pace was a rapid 3.5 percent, fuelled in part by super-strong population growth of 2.1 percent.

The solid data should give the Reserve Bank of New Zealand (RBNZ) further reason to not lower interest rates when it meets in February, even as inflation and wages growth remain subdued.

The RBNZ has already slashed interest rates thrice this year to a record low 1.75 percent to help stoke inflation, which, at just 0.2 percent sits well below the bank's target band of 1 to 3 percent.

Manufacturing grew 1.2 percent in the quarter while higher visitor numbers boosted tourism exports and retail, trade and accommodation services.

Growth in the overall services sector, which makes up 70 percent of the economy, rose 1.1 percent, while construction jumped 2.1 percent.

A 0.7 percent decline in goods exports, which were hit by falling daily and meat shipments, was practically the only soft spot and that should change this quarter with dairy prices recovering.

Separately, Reuters reported that New Zealand's current account in the third quarter posted a deficit of NZ$4.891 billion in the three months to September, from a deficit of NZ$0.932 billion in the previous quarter, according to Statistics New Zealand.

The seasonally adjusted quarterly deficit was NZ$1.899 billion from NZ$1.844 billion in the previous quarter.

The annual deficit to September was NZ$7.48 billion, equating to 2.9 percent of gross domestic product.

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