New Zealand's residential and commercial construction rose in the fourth quarter, adding to signs the economy expanded at the fastest pace in 18 months.
Residential building rose 2.3 per cent in the three months ended December 31, excluding inflation, Statistics New Zealand said in a report released in
Wellington yesterday.
Non-residential construction rose 2.2 per cent.
The economy probably expanded 1 per cent in the fourth quarter, led by housing and consumer spending, Reserve Bank Governor Alan Bollard said on Thursday.
Accelerating growth prompted the central bank to raise benchmark interest rates to a record 7.5 per cent.
"The report is entirely consistent with the view that the fourth-quarter was very robust," said Stephen Toplis, head of research at Bank of New Zealand in Wellington. "It reflects the general strength of the economy in the second half of 2006."
Toplis expects gross domestic product increased 1.1 per cent in the fourth quarter. The growth report is published on March 30.
On March 5, the Treasury Department said fourth-quarter growth was probably between 0.8 per cent and 1 per cent. Previously, the department forecast 0.4 per cent.
Bollard said on Thursday that economic growth would accelerate to 3 per cent this year from a seven-year low of 1.4 in the September year.
The recovery in domestic demand and the housing market "is not temporary" and may stoke inflation, justifying the first rate increase in 15 months, he said.
"Depending on the persistence of the current upturn, further tightening may be required."
Toplis expects growth of 2.6 per cent this year and said the economy could not expand any faster without fanning inflation.
"Housing is strong, retail spending is still lofty. It's only the exporters that are suffering from the currency."
Export volumes fell 2.5 per cent and import volumes rose 3.2 per cent in the fourth quarter, Statistics New Zealand said in its terms-of-trade report released on Thursday.
Volumes of consumption goods rose to a record.
"There has been some rebalancing of the economy toward exports and away from domestic spending," said Khoon Goh, senior economist at ANZ National Bank in Wellington.
"It is looking like that is reversing as the external sector struggles with the high dollar."
- Bloomberg
