New Zealand posted faster than expected growth in the first quarter as high migration boosted spending throughout the economy. Gross domestic product rose a seasonally adjusted 0.7 percent in the first quarter versus the prior quarter and 2.8 percent on the year, Statistics New Zealand said on Thursday.
Economists polled by Reuters expected 0.5 percent on the quarter and 2.6 percent on the year. Statistics New Zealand said construction activity rose 4.0 percent q/q, the strongest quarterly growth since March 2014.
High net migration contributed to broad-based growth, supplemented by strong earnings from tourism, offsetting a 3.5 percent decline in goods exports, which were hit by falling dairy(-8.9 percent)and meat product(-13 percent)shipments.
“Very strong population effects are coming through many industries, particularly the service sector…We’re also seeing the flow-on effects in the likes of house construction,” said Doug Steel, economist at BNZ. Quarterly GDP growth, which was higher slightly higher than the 0.6 percent forecast by the Reserve Bank of New Zealand, would give the bank further reason to pause on lowering interest rates when it meets in August, analysts said. They noted, however, that other factors such as low inflation were likely to come into play.
New Zealand’s central bank held its benchmark policy rate at a record-low 2.25 percent last week and signalled its reluctance to ease further in the face of a hot housing market. The New Zealand dollar, already trading higher after the U.S. Federal Reserve chose not to raise interest rates overnight, rose to $0.7082 from around $0.7040 in the wake of the GDP release. (Reporting by Charlotte Greenfield; Editing by Eric Meijer)