New Zealand economy likely posted good growth in Q2

WELLINGTON : New Zealand's economy probably grew solidly in the second quarter as activity picked up after a devastating

Published August 17, 2011 Updated August 17, 2011 05:40am

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By Shoaib Ur Rehman

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The bank's regional trends survey, seen as a rough pointer to gross domestic product, showed activity rose 0.8 percent in the quarter, after a 0.1 percent contraction in March and 0.2 percent rise in the December quarter.

The survey showed the Canterbury region, which includes the city Christchurch struck by a deadly quake in February, grew 1.9 percent from the previous quarter's 2.5 percent contraction.

The strongest growth was reported in Southland at 2.1 percent, on the back of employment gains, and improved house and retail sales, with the dairying region of Waikato close behind with 2 percent growth.

Auckland, the country's biggest population and commercial centre, showed 0.4 percent growth, while the Wellington region, including the capital city, contracted 0.7 percent.

New Zealand grew 0.8 percent in the first quarter, the fastest pace in more than two years, shrugging off the impact of Christchurch earthquake, but has been slow to pick up momentum after emerging from a 15-month recession in June 2009.

Official second quarter GDP data is due on Sept. 22.

The National Bank of NZ survey also showed an average growth rate of 0.6 percent in the year to June 30, with the North Island growing 0.8 percent compared with a 0.1 percent contraction in the South Island.

The Reserve Bank of New Zealand held its cash rate at 2.5 percent in late July but said there was little need for the rate to stay at the record-low equalling level if global financial risks recede and the economy continues to recover.

After last week's market turmoil analysts have scaled back their expectations of RBNZ rate rises.

The latest Reuters poll of 18 analysts shows a majority expects a hike in September, with 10 seeing either a 25 or 50 basis points rise, and the rest spread between December and the first half of next year.

That compared with 17 of 18 expecting a September rise in a Reuters poll immediately after the previous rate review.

Pricing of a rise has declined after the global market gyrations, implying a 32 percent chance of a 25 basis point hike in September, down from bets of a 50 bps hike.

The survey uses 21 indicators, including building permits, retail sales, vehicle registrations, and consumer and business confidence, to determine an overall measure of economic growth.

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