There was a "now you see it, now you don't" quality to the national accounts Statistics New Zealand released yesterday.
The economy grew 0.8 per cent in the September quarter, outdoing the 0.6 per cent forecast by the Reserve Bank and the consensus of market economists.
But Statistics NZ revised down previous quarters by a cumulative 0.8 per cent, leaving the level of economic activity in the September quarter no higher than had previously been recorded for the June quarter - and back where it was in March 2008.
It pushed annual growth to 1.9 per cent, the highest rate since March 2008, but weaker than the 2.2 per cent the market was expecting.
On the expenditure measure, the biggest contribution came from a run-up in inventories, the largest since comparable data began in 1987.
While some of that will show up as exports in future quarters, some of it will represent unexpected weakness in demand and implies lower output in the future.
Statistics NZ pointed to the contrast between a 3.3 per cent rise in manufacturing of wood and paper products and a 1.9 per cent drop in exports of the same, contributing to the build-up of inventories.
Manufacturing output was also boosted by a 6.3 per cent rise in the food processing sector, mainly meat and dairy products.
But manufacturing of machinery and equipment, metal products and chemical products all fell.
Among service industries, the retail, accommodation and restaurant sector saw a 2.5 per cent jump in activity in the quarter, boosted by Rugby World Cup visitors.
The finance, insurance and business services sector made a similar contribution to growth.
But construction had another poor quarter, shrinking 2.2 per cent to the lowest level of activity since June 2002.
On the expenditure side of the ledger, private consumption jumped 1.5 per cent in the quarter - the largest increase for four and a half years - making 3 per cent for the year.
It was driven by spending in supermarkets, which may have benefited from the influx of World Cup visitors.
But investment in infrastructure and non-residential building shrank, by 6.5 and 7.1 per cent respectively.
And investment in residential building fell a further 1.8 per cent, to the lowest level since 1993.
However investment in plant, machinery and equipment rose 6 per cent, which is consistent with increased imports of such goods and positive for the economy's productive capacity.
Exports of goods fell 1.8 per cent in the quarter in volume terms, led by dairy and meat, while imports rose 3 per cent, led by plant and machinery, and cars.
ANZ senior economist Mark Smith said export commodity prices were high but agricultural output was slow to respond to price signals and exporters selling to United States and European markets were struggling with a high New Zealand dollar.
Bank of New Zealand head of research Stephen Toplis said the historical revisions to the GDP track meant much more spare capacity in the economy than had previously been thought.
"The increase in spare capacity won't be the same as the downward revision to activity, but it should be sufficient for the Reserve Bank to conclude that inflationary pressures are not as great as had been anticipated," he said.
"Accordingly, not only will the bank feel comfortable with its current view that there is no need for a cash rate hike until the second half of 2012 but it may even lend support for a slightly longer wait than currently forecast."
BNZ has revised down its growth forecast for next year to 2.1 per cent.
0.8 per cent
economic growth in September quarter
1.9 per cent