KEY POINTS:
The economy raced ahead in the March quarter, with Gross Domestic Product growing bang on economists' predictions at 1 per cent from the previous three months.
That lifted the annual growth rate to 1.7 per cent, also exactly on the median of predictions made by economists in a
Reuters poll.
Releasing the data today, Statistics New Zealand (SNZ) said domestic expenditure increased 1.2 per cent in the March quarter, driven by a 2.2 per cent increase in household consumption expenditure combined with a 5.2 per cent increase in business investment.
The increase in household consumption expenditure was on the back of record growth in retail sales, SNZ said.
It was driven by a 5.1 per cent increase in expenditure on durables, with spending on retail furniture and major appliances contributing strongly to the increase.
The strong domestic result was partly offset by the continuing negative trade balance, with import volumes having now exceeded export volumes for the 16th consecutive quarter.
Exports of dairy products accounted for nine-tenths of a 2 per cent growth in export volumes in the March quarter, SNZ said.
Dairy product export volumes were up 10.5 per cent in the quarter and 21.8 per cent for the year ended March.
The 4.3 per cent increase in import volumes in the March quarter resulted from across-the-board increases in imports of capital, intermediate and consumption goods.
Motor vehicles were the only import category to fall, down 13.4 per cent in the quarter.
Most of the growth in the March quarter came from a 1.2 per cent increase in service industries, SNZ said.
Retail, accommodation and restaurants provided the largest contribution to growth, up 3.6 per cent, the largest quarterly increase in the industry since the June 1989 quarter.
Goods-producing industries rose 1.3 per cent in the March quarter, with manufacturing and construction industries up 1.1 per cent and 2.6 per cent, respectively.
The major contribution to the increase in manufacturing came from a 6.6 per cent rise in metal product manufacturing.
The 1 per cent growth for the March quarter was the fastest since a 1.1 per cent rise in June 2005, and follows an increase of 0.8 per cent in the December quarter.
The 1.7 per cent annual growth rate was higher than in any of the previous three quarters, with the growth for the December year having been 1.5 per cent, but other than that was below the annual growth rate since the June 2001 quarter.
For the whole of the year to March, business investment in fixed assets declined 3.6 per cent, but in just the March quarter it rose 5.2 per cent.
The major contributor to the March quarter was a 27.9 per cent increase in transport equipment as a result of investment in new aircraft.
BNZ economist Stephen Toplis said the data confirmed domestic demand was driving expansion with private consumption, in particular, to the fore.
He said it was above the 0.8 per cent the Reserve Bank was forecasting and would keep pressure on interest rates.
"Sure it's a little bit stronger than the central bank had forecast, so at the margin puts a little bit more pressure on the bank, especially when taken with terms of trade surprising on the upside and building activity continuing apace.
"It certainly gives them no ability to relax at this stage, and leaves the door wide open for another rate increase if they so desire."
ANZ economist Khoon Goh said the data justified the Reserve Bank's three rate hikes so far this year "and it will pretty much keep them on tenterhooks for July".
UBS economist Robin Clements said the data was history and didn't reflect the impact of this year's rate hikes, which came after the data.
"I don't think it will push them into panic mode, although it will certainly keep them on edge."
The New Zealand dollar, which briefly touched a new post-float 22 year high of US77.12c moments before the data, fell after the numbers to settle around US76.95c.
- NZPA
