New Zealand's economy kicked off 2011 with a bang, growing at twice the forecast pace and the fastest since December 2009 as a resurgent manufacturing sector drove the nation's revival in the face of Canterbury's earthquakes.
Gross domestic product grew 0.8 per cent in the three months ended March 31, according to Statistics New Zealand, beating a Reuters survey of economists, which was picking 0.4 per cent growth and Treasury and Reserve Bank forecasts of just 0.3 per cent expansion.
That's the fastest pace of growth since the final quarter if 2009, when the economy grew 0.9 per cent. Annual GDP rose 1.5 per cent to $135.8 billion, the biggest the New Zealand economy has been in a March year since 2008. The kiwi dollar jumped to 84.71 US cents after the report, a new post-float high, from 83.95 immediately before.
The period captured the February 22 Christchurch earthquake, which killed 181 people and caused as much as $15 billion of damage to the country's second-biggest city, and was widely cited as a drag on the economy's tepid recovery.
Statistics NZ said the gain was underpinned by a 3.6 per cent acceleration in manufacturing growth, which followed on from a 3.4 per cent increase in the last three months of 2010. That was driven by a 16 per cent increase in machinery and equipment manufacturing, and 8.7 per cent growth in metal product manufacturing.
"The strong growth in the latest quarter despite the 22 February earthquake, was mainly due to manufacturing," national accounts manager Rachael Milicich said in a statement. "While some businesses were adversely affected, the vast majority were able to continue operating, and the earthquake resulted in some activity that would not normally have taken place."
Statistics NZ had a more upbeat view of previous quarters, revising up the December quarter to 0.5 per cent growth from a previous 0.2 per cent, and revising down the 0.2 per cent contraction in the September quarter to a 0.1 per cent contraction.
The department said it was confident the data was correct, given the size and scope of the Canterbury quake. The quake caused a contraction in building activity, with construction contracting 4.3 per cent, though it stoked other areas.
Goldman Sachs New Zealand economist Philip Borkin described the GDP stats as a " remarkably strong start to the year".
In a release, he said it suggested that the earthquake disruption was less than expected and the rest of the economy started strongly after a disappointing 2010.
"Both our economic forecasts and monetary policy expectations are now under review."
"Overall, today's data suggests two key things in our eyes: 1) the disruption to regional economic activity after the earthquake was not as large as initially feared and shows the resilience of those in Canterbury to resume some form of "normality"; and 2) the rest of the economy expanded reasonably strongly over the first three months of 2011 after a disappointing 2010."
"Looking forward, we expect economic momentum in the economy to continue to build over the remainder of the year," said Borkin, although he would not rule out a "moderation in the pace of growth" in the second quarter of this year.
"Loose financial conditions (outside of the strong NZ$), better balance sheets in the household and agricultural sectors, and the impact of the Rugby World Cup are all supportive. Our forecasts themselves are now under review. "
"While this data is "historical", clearly it is a strong positive surprise and shows an economy in a better position than many initially feared (including ourselves and the Reserve Bank)."
Government administration and defence grew 2.1 per cent in the quarter due to the preparations for the 2011 census, which was delayed because of the quake, and its response to the Christchurch disaster.
Statistics NZ delayed the GDP release for a second time last week, saying it needed more time to analyse the data after the Canterbury quakes severely damaged its Christchurch office.
Activity in primary industries shrank 0.6 per cent in the March quarter, led by a 3.2 per cent decline in fishing, forestry and mining. Agriculture grew 1 per cent on the back of increasing milk production.
The surge in economic activity reflects increasing signs of life in New Zealand's economy, which took a major blow in confidence after the quake, and the strength in the kiwi dollar reflects the relative fortunes of the nation.
The kiwi dollar hit a new post-float high of 84.19 US cents today, and is some 10 cents above the 74.23 cents where it was at in the fourth-quarter GDP release in March.
Today's release will go some way to reverse the downbeat assessment of New Zealand's economy, which was facing a double-dip recession last year.
Spending on credit and debit cards increasing in June as consumer confidence surveys showed people were shaking off their lethargy after the Canterbury quakes. The GDP data showed household consumption grew 0.4 per cent in the March quarter.
Businesses were also more upbeat at the end of the second quarter, with the New Zealand Institute of Economic Research's quarterly survey of business opinion showing a strong rebound in sentiment.
Gross fixed capital formation, which measures investment in fixed assets, shrank 1.3 per cent due to a decline in spending on non-residential building.
Total inventories were run down by $101 million in the period after a $580 build-up in the December quarter. The run-down would have been bigger if the Christchurch quake hadn't caused stock-losses.