"The drought early this year influenced falls in agriculture and manufacturing this quarter, but this was balanced by strong growth in the service industries"
- Steffi Schuster, acting national accounts manager
Kiwi economy expanded at a modest pace in the second quarter as consequences of the worst drought in 30 years were offset by an improvement in construction activity. A report from the Statistics New Zealand showed the nation's gross domestic product expanded 0.2% to $37.26 billion in three months ended June 30, decelerating from a revised growth of 0.4% in the March quarter, and outpacing analysts' expectations for a 0.1% expansion. Annual growth of 2.7% was well ahead of the 2.4% pace estimated by analysts. The main drag on the economy came from the agricultural sector, where output plunged 6.4% on a yearly basis, and was down 10.4% from a peak recorded in the December quarter. At the same time, the main contributor to growth was business services, where activity soared 2.6%, while retail trade and accommodation advanced 2.1%. Immediately before the release of optimistic figures, Kiwi rocketed to a new four-month high versus the greenback, hitting $0.8384.
Simultaneously, NZ Deputy Prime Minister Bill English pointed out the domestic economy is in the good shape and it is poised to become one of the fastest growing economies in the next couple of years, providing plenty of opportunities for investment. Earlier this month, New Zealand's central bank noted they are likely to start raising interest rates in 2014 as the pace of growth quickens.
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