WELLINGTON: New Zealand’s economic growth remained “solid” in the January-March quarter as strong construction offset the struggling dairy and mining sectors, official data showed.
Statistics New Zealand said the economy expanded 0.7 percent in the first quarter of 2016, up slightly on expectations of 0.5 percent.
The result took annual growth for the year to March 31 to 2.4 percent, up from 2.3 percent in the previous quarter.
Finance Minister Bill English said it showed the economy was not reliant on dairy, which is experiencing a long-term slump in prices due to a glut in global supply.
“Despite the dairy sector continuing to be under pressure, other sectors are performing well and contributing to an overall solid rate of economic growth,” he said.
The quarterly data showed construction rose 4.9 percent over the three-month period, with agriculture flat on 0.5 percent and mining down 3.3 percent.
The data is seen as decreasing the chances of a near-term interest rate cut, sending the New Zealand dollar up 0.41 US cents to 70.79 US cents after it was released.
“Looking ahead, the Reserve Bank of New Zealand is expecting GDP growth to accelerate from 2.5 percent last year to around 3.0 percent this year,” said Capital Economics chief Australia and New Zealand economist Paul Dales.
“But we think growth will stay put at 2.5 percent as the drag from the diary sectors seeps out into the wider economy. This partly explains why we suspect the RBNZ will eventually reduce rates to 1.75 percent.”
The central bank left its benchmark rate on hold at 2.25 percent last week, having lowered it five times in the past year.