KEY POINTS:
The economy grew 1 per cent in the March quarter on a high-fat diet of consumer spending.
But economists expect the pace of growth to slacken as interest rate rises, a high dollar and dwindling net immigration outweigh the boost from strong commodity prices and Government spending.
The
1 per cent increase in Statistics New Zealand's production measure of gross domestic product pushed the annual average growth rate to 1.7 per cent, its best for a year. Growth was strongest in the retail, construction and wholesale trade sectors.
Manufacturing grew 1.1 per cent after shrinking in five of the previous six quarters, with growth strongest in metal product manufacturing.
On the expenditure side the main driver of growth was a 2.1 per cent lift in private consumption, an increase that has only once been equalled, and never exceeded, in the past 11 years.
More than half of the increase in household spending was on durables such as furniture and appliances and was reflected in a hefty (4.7 per cent) increase in imports of consumer goods.
Business investment was up 5.2 per cent in the quarter, swollen by investment in new aircraft. But solid gains were also posted in investment in plant, machinery and equipment (2.4 per cent) and buildings (3.4 per cent).
For the 16th quarter in a row imports exceeded exports. Dairy products accounted for 90 per cent of the 2 per cent increase in exports, which were swamped by an aircraft-boosted 4.3 per cent rise in imports.
Bank of New Zealand economist Craig Ebert said that excluding services exports, which fell 0.8 per cent, and dairy products, exports still posted an increase of 1.2 per cent in the quarter and were up 1.6 per cent on a year earlier.
"It's not stellar. But it's hanging in there at a time when the dollar is supposed to be crippling the economy."
First NZ Capital economist Jason Wong said more timely indicators suggested growth had petered out in the June quarter, with consumer spending slowing considerably and export volumes sluggish.
"Looking further ahead, the key drivers of growth are pointing in different directions. On the positive side, global growth remains strong, New Zealand is experiencing very strong terms of trade driven by high dairy prices, and a significant easing in fiscal policy is under way," he said.
"On the negative side, interest rates have risen considerably, as has the New Zealand dollar, and net migration is in a weakening trend."
ASB economist Daniel Wills said the Reserve Bank might regard it as a slight surprise, having forecast 0.8 per cent.