New Zealand's GDP growth slows but tops forecasts in sign of resilience

By Lucy Craymer

WELLINGTON, Sept 17 (Reuters) - New Zealand's economy grew more slowly in the second quarter than the prior as the crisis in the Middle East dampened confidence, but growth came in slightly stronger than expected, which should ease central bank concerns about risks to growth.

Official data on Thursday showed gross domestic product (GDP) rose 0.2% in the second quarter on the prior quarter, better than analysts' forecast of a rise of 0.1% and the Reserve Bank of New Zealand's forecast of no growth. However, it was slower than 0.8% growth in the first quarter.

Annual GDP increased 2.6%, Statistics New Zealand data showed. The market had expected a 2.2% increase.

Westpac senior economist Michael Gordon said the data reinforced the message that New Zealand's economy had "largely held its ground through the US-Iran conflict, though it hasn't been completely unscathed".

He added that this data should help assuage some of the central bank's committee members' concerns about downside risks to growth, although Westpac continues to view inflation indicators as key to the central bank's next move.

The New Zealand dollar was trading up slightly at US$0.5724 from US$0.5718 as the data beat forecasts, but the currency remains under pressure following the Federal Reserve's decision to raise rates.

Statistics New Zealand spokesperson Jason Attewell said that the results were mixed with just nine of the 16 industries seeing growth. The data showed that construction was the largest upward contributor to the overall increase in GDP, up 2.7% in the quarter, while the largest downward contributors were transport, postal and warehousing.

After a prolonged period of weakness, New Zealand’s economy has begun to show signs of resilience. The country's central bank said it expected the recovery to strengthen and become more broad-based, after raising the official cash rate earlier this month by 25 basis points for a second consecutive meeting to 2.75% as inflation remained above its target range.

Kiwibank economists said while the second-quarter outcome was good in the context of the oil crisis, New Zealand's economy still had the smallest growth out of the nine other countries and country groups Stats NZ compared it to.

"The path forward into the rest of the year will be largely determined by whether the momentum we seem to have carried forward into June will continue," they said in a note to clients.

The economy has become a central battleground ahead of New Zealand's election on November 7, with no clear winner yet to emerge.

The ruling coalition was elected three years ago on a pledge to revive growth, while the opposition Labour Party is campaigning on measures to ease cost-of-living pressures on middle-income households.