WELLINGTON: New Zealand’s farm-dependent economy is growing more slowly than expected, official figures showed on Thursday, feeding expectation of further interest rate cuts.
Statistics New Zealand said the economy expanded 0.4 percent in the three months to June, below consensus forecasts of 0.6 percent.
That pushed down annual growth in gross domestic product (GDP) to 2.4 percent, after 3.3 percent for 2014, and to the lowest in two years with economists expecting it to fall further.
The June quarter improved on the first three months of 2015 when dairy prices plunged, but still fell short of economists’ estimates.
“The 0.4 percent rebound . . . from the 0.2 percent rise in the first quarter, is disappointing and supports our view that the economy is weaker than the RBNZ [Royal Bank of New Zealand] believes,” said Paul Dale, chief Australia and New Zealand economist at Capital Economics.
“We remain confident in our view that interest rates will be reduced from 2.75 percent now to 2.0 percent by early next year.”
New Zealand cut interest rates just last week, the third reduction in a year, with the central bank suggesting further easing was on its way as growth softens and inflation stays low.
“These data suggest that even our below-consensus call that GDP will rise by just two percent this year now looks a bit too optimistic,” Dale said.
The New Zealand dollar lost 0.4 US cents to fall as low as 63.31 US cents on the release of the latest GDP figures before recovering slightly.
The main growth drivers were agriculture, up 3 percent on strong dairy production, mining up 2.5 percent and business services 2.3 percent.
“Despite falling milk prices, we’re seeing growth in dairy production,” national accounts manager Gary Dunnet said.
“But over the year, agriculture is up only a little, due to dry conditions last summer.”
On the downside, transport fell 1.8 percent.