The figures support the NZ central bank’s view that it must press on with interest rate increases to keep inflation at bay.
The economy grew one per cent pace in the first three months of the year, from an upwardly revised one per cent gain in the fourth quarter, marking three quarters of growth at one per cent or above, Statistics New Zealand said.
Quarterly growth was below the 1.2 per cent expected in a Reuters poll of economists, although the annual rate beat the forecast for 3.1 per cent.
New Zealand’s economic expansion in the latest quarter was helped by a 12.5 per cent rise in construction, which accounted for two-thirds of gross domestic product (GDP) growth and marked its largest increase in 14 years.
Last week, when raising the official cash rate (OCR), the Reserve Bank said the economy’s expansion had “considerable momentum” and raised its estimate for growth in the first half of the year to four per cent from 3.5 per cent.
“While the headline was a bit softer than we or the Reserve Bank had expected, taking revisions to previous quarters into account, today’s result still suggests that the economy had developed considerable momentum at the start of the year,” Westpac senior economist Michael Gordon said in a note on Thursday.
“Today’s numbers will do nothing to dissuade the Reserve Bank from its intention to continue hiking the OCR in its July review.”
The New Zealand dollar fell to 87.17 US cents from 87.34 cents immediately before the report was released. The trade-weighted index eased to 81.11 from 81.25.
Growth in construction was strong in Canterbury, and the rest of the country, the statistics agency said.
Construction has surged in Christchurch as the city is being rebuilt following its series of earthquakes.
Mining was the second-largest contributor to growth in the quarter, up 6.3 per cent, the agency said.
The rise was driven by oil and gas extraction activity which marked its largest quarterly growth since the December 2007 quarter.
Meanwhile, retail trade and accommodation increased 1.4 per cent as retail trade rose 0.9 per cent driven by an increase in furniture, electrical and hardware retailing.
Dragging on growth, wholesale trade activity fell 1.5 per cent, partly due to a decrease in machinery and equipment wholesaling.