Pick-up in economic activity surpasses expectations

Photo / APN

Propelled by good growing conditions on the farm and a pick-up in quake-related construction, economic activity grew 0.6 per cent in the June quarter, beating market and Reserve Bank expectations.

Agricultural output grew 4.7 per cent to record levels, with higher milk production the main contributor, Statistics NZ said.

Over the year ended June agricultural output was up 6 per cent on the year before - three times the growth rate of the overall economy.

"Although this boost is encouraging, it is not expected to last," said Infometrics economist Matt Nolan. "Eventually growing conditions will return to normal and agricultural production will decline from its current peaks."

By contrast, construction's 3.3 per cent growth in the quarter is seen as just the beginning.

It follows four grim years in which activity troughed out last September at more than a quarter below the pre-recession peak.

As well as infrastructure work, the pick-up included a 6.2 per cent quarterly increase in residential building, led by Canterbury.

On the spending side of the accounts there was a 12.8 per cent jump in business investment in plant and machinery, lifting it to its highest in four years.

Household consumption, however, was subdued growing 0.2 per cent. The main driver was spending on durables such as cars, assisted by the strong dollar. Household spending on non-durable goods and on services was flat.

ANZ economist Mark Smith said the recovery had been tepid, with economic activity now just 2 per cent above its pre-recession level 4 years ago.