Picture / Greg Bowker
New Zealand's economy accelerated by less than expected in the second quarter, with agriculture and mining recovering from a weak start to the year. The kiwi dollar dropped almost half a US cent.
Gross domestic product grew 0.4 percent in the three months ended June 30, accelerating from a 0.2 percent pace in the March quarter that was the slowest in two years, Statistics New Zealand said.
While agricultural production drove activity in the period, it was still below economists' forecasts for GDP growth of 0.5 percent and the 0.6 percent rate the Reserve Bank expected. On an annual basis, GDP grew 2.4 percent, just below the 2.5 percent forecast in a Reuters poll, and down from a 2.7 percent annual pace in March.
"Despite falling milk prices, we're seeing growth in dairy production," national accounts manager Gary Dunnet said in a statement. "But over the year, agriculture is up only a little, due to dry conditions last summer."
The New Zealand dollar fell as low as 63.31 US cents after the figures were released from 63.71 cents immediately before. The trade-weighted index fell to 68.43 from 68.79.
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Local businesses have become more pessimistic about the country's economy as tumbling global dairy prices through much of this year prompted dairy exporter Fonterra to slash its forecast payout to farmers, draining the prospective income for New Zealand's farming sector.
The decline in the nation's terms of trade also spurred the Reserve Bank to start cutting interest rates, and governor Graeme Wheeler last week warned more easing was likely, depending on the flow of data.
Today's figures show agricultural production grew 3 percent in the quarter, snapping two quarterly contractions, on increased dairy production and a pick-up in beef and lamb farming. The mining sector expanded 2.5 percent, turning around two quarterly contractions, with a new oil well and the re-opening of another offset declines in coal mining and oil exploration. Primary industries grew 2.8 percent in the year, from a contraction of 1.8 percent three months earlier.
Growth in the primary sector helped offset a 1.8 percent contraction in transport, postal and warehousing activity, which registered its biggest quarterly decline since March 2009, due largely to lower road transport activity and support services.
Among other sectors to contract were a 1.1 percent decline in wholesale trade, and 0.1 percent dip in retail trade and accommodation, a 0.4 percent fall in public administration and safety, and a 1.7 percent drop in arts, recreation and other services.
Manufacturing shrank 0.4 percent in the quarter, the second quarterly contraction, with food production the only component to grow in the period, due to the pick-up in agricultural activity. Construction grew 0.8 percent, adding to the 2.2 percent expansion three months earlier. Information, media and telecommunications activity expanded 2.5 percent, turning from a 2.8 percent contraction in the March period.
The expenditure measure of GDP grew 0.2 percent in the quarter for a 2.7 percent annual expansion. Household spending grew 0.9 percent in the quarter, led by expenditure on service, while business investment expanded 2.2 percent on purchases of plant, machinery and equipment, and a pickup in non-residential and infrastructure construction. A decline in exports and increase in imports dragged down the expenditure measure in the quarter.
Real gross national disposable income per capita, which measures the purchasing power of households, grew 0.4 percent in the quarter for an annual increase of 0.2 percent.