- Mark Smith, senior economist at ANZ Bank New Zealand
New Zealand's economy expanded more than economists had predicted in the third quarter, driven by manufacturing and retail spending, which compensated for a decline in milk powder production. The nation's gross domestic product grew 0.9% from the June quarter, when it climbed a revised 0.3%, Statistics New Zealand reported. In annual terms, New Zealand's economic output increased 2.3% from a year earlier, compared with the 2.4% surge in the preceding three-month period. The economic revival has also been supported by a surge in spending by tourists amid a 12% decline in the New Zealand Dollar in the past year. The retail trade and accommodation industry soared 6% from a year ago, the quickest of 16 industries. The pickup in economic growth came after a weak middle of the year, when production stalled, due to sinking global dairy prices. That forced the central bank to launch an easing cycle in June, slashing the official cash rate four times to 2.5%.
Better than anticipated economic performance underscores the Reserve Bank of New Zealand's expectations that inflation would return to its target zone without further interest rate cuts. The central bank sees increasing export prices, improved business confidence, low borrowing costs and record immigration to further bolster the economy's growth next year.
© Dukascopy Bank SA