The New Zealand economy grew at its fastest quarterly pace in five years as good weather stoked milk production, and led to greater dairy manufacturing. The kiwi dollar surged to above 80 US cents after the figures were released.
Gross domestic product grew 1.1 per cent to almost $35 billion in the three months ended March 31, the fastest quarterly pace since March 2007, according to Statistics New Zealand. That's more than twice the 0.5 per cent pace forecast in a Reuters survey of economists and almost three times the Reserve Bank's 0.4 per cent projection.
The government statistics bureau revised the three previous quarters to 0.4 per cent growth in each period, a cumulative increase of 1.2 percentage points.
"This quarter we saw growth spread across a number of industries, while in previous quarters the industry picture had been more mixed," national accounts manager Rachael Milicich said in a statement. "Good growing conditions have been a major factor in the growth this quarter, and are reflected in both the milk production in in agriculture and in meat and dairy manufacturing."
The kiwi dollar climbed as high as 80.06 US cents from 79.55 cents immediately before the figures were released. The kiwi was recently at 79.96 cents.
Economists expected better milk production and greater livestock slaughter would underpin quarterly growth, even as their outlook for economic growth slowed on delays to the Canterbury rebuild.
Economic activity was up 2.4 per cent in the March quarter compared to the same period a year earlier. The economy grew 1.7 per cent in the year ended March 31, and was $202 billion in current prices, Statistics NZ said.
Agriculture, forestry and fishing rose 2.1 per cent to $2.12 billion in the quarter due higher milk production as good. Since the end of 2011, dairy prices have been falling on Fonterra Cooperative Group's online trading platform, and the exporter recently trimmed its forecast payout to farmers as a resiliently high kiwi dollar drags down returns on foreign sales.
The manufacturing sector rose 1.8 per cent to $4.72 billion as greater milk production stoked dairy manufacturing. Food, beverage and tobacco manufacturing climbed 3.2 per cent.
There was a $416 million build-up in inventories due to greater manufacturing and a decrease in exports.
That comes after yesterday's balance of payments showed a wider deficit of $2.8 billion in the quarter on weaker dairy prices and a drop off in visitors after the Rugby World Cup.
Business investment rose 2.1 per cent in the quarter, its biggest rise since December 2010, on more imports of plant and machinery and non-residential building work.
Construction activity shrank 0.1 per cent to $1.47 billion as building work remains subdued ahead of the Canterbury reconstruction.
Information, media and telecommunications shrank 3 per cent to $2.1 billion in the quarter, the biggest drag on the economy in the period.
Retail, trade and accommodation grew 4.5 per cent to $9.59 billion in the quarter.
That came as household consumption remained muted, up 0.1 per cent to $21.18 billion in the quarter.