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Economy grows slower-than-expected

NZN 14/06/2017

New Zealand's economy grew at a slower pace than expected in the first three months of the year as building activity and investment shrank.

That offset a recovery in milk production which spurred agriculture.

Gross domestic product expanded 0.5 per cent in the three months ended March 31, accelerating from a 0.4 per cent quarterly pace in the December quarter, according to Statistics New Zealand figures released on Thursday.

It was 2.5 per cent higher than the same period a year earlier.

That was below the 0.7 per cent quarterly expansion forecast in a Reuters poll of economists, which also tipped GDP to be 2.7 per cent higher than March 2015.

Activity was weighed on by a 2.1 per cent contraction in the construction sector - the first decline since June June 2015 - as non-residential building work fell from a peak.

Earlier construction data had been seen as a potential drag on the economy in the quarter by economists ahead of Thursday's figures.

Construction activity rose 3.8 per cent from a year earlier.

"Much lower building activity combined with mixed results for the service sector took the shine off higher dairy production," national accounts senior manager Gary Dunnet said in a statement.

"At an industry level, 11 out of 16 industries increased this quarter, with agriculture and retail trade having the biggest increases, while construction was significantly down."

But Labour's economic spokesperson, Grant Robertson, said on a per-person basis, the economy was going backwards.

The GDP per capita decreased 0.1 per cent for the March quarter, following a 0.2 per cent fall in the three previous months, according to Stats NZ

"Relying on population growth and an overheated housing market to prop up the economy is a dangerously complacent approach," Mr Robertson said.

"The decline in the construction sector is particularly worrying. We already have a shortage of 60,000 houses, growing by the day."

Finance Minister Steven Joyce said the figures were a reminder the international environment was still "challenging".

"This is not the time to rest on our laurels and start considering policies that would damage growth in key sectors or across the economy," he said.

New Zealand's economy has been seen as a relative stand-out compared with other developed nations.

Record net migration, strong tourism flows, a massive pipeline of building work, and a recovery in global dairy prices have spurred enough job creation to meet a swelling population.

Still, globally low interest rates and a strong New Zealand dollar have limited inflationary pressures, while a labour market flush with migrants has kept wages largely flat in an economy that has struggled to lift productivity.

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