Economy performance ‘a cracker’

THE New Zealand economy produced a cracker of a performance in the three months ended June, ASB senior economist Jane Turner says.

The economy grew at 1% in the three months, double the growth rate of 0.5% in March. The 1% growth was above both economists’ and Reserve Bank forecasts.

The annual growth rate was 2.8%, ahead of 2.6% in March and the Reserve Bank’s forecast of 2.5%.

Ms Turner said growth in the quarter was strong and would have been phenomenal if not for a near 20% decline in mining production due to an unplanned shut down in gas production.

As expected, GDP growth was led by strong growth in electricity generation, a large broadbased lift in agricultural production, a strong performance in retail and wholesale trade, and strong growth in arts, recreational and cultural services.

There was also stronger than expected growth in other parts of services, including a strong 1.8% lift in transport, postal and warehousing, and a 1.1% lift in information media and telecommunications.

‘‘It is evident in the second quarter all parts of the economy were performing well as the strength was remarkably broadbased.

‘‘This sits with our view the economy is currently benefiting from a number of supports.’’

Those supports included high terms of trade, low interest rates and growth.

Statistics New Zealand reported a leaking pipeline led to an unplanned shut down in New Zealand’s largest gas field. It led to downstream effects on manufacturing production, adding to some drag from the planned shut down at the Marsden Point oil refinery.

Looking ahead, Ms Turner was concerned growth might have lost momentum in the three months ended September.

Negative business sentiment posed a threat to economic growth being sustained at current rates in the coming year.

Taking recent business confidence readings at face value, in particular business investment and employment intentions, growth could be much weaker than forecast.

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