New Zealand economy expands faster than expected; currency gains

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New Zealand’s economy expanded faster than economists expected in the fourth quarter as construction, retail spending and business services growth more than offset a fall in farm production. The currency surged.

Gross domestic product grew 0.9 percent, matching the pace in the previous three months, Statistics New Zealand said in Wellington Thursday. The fourth-quarter expansion was faster than the 0.7 percent median forecast of 17 economists surveyed by Bloomberg News. GDP rose 2.3 percent from a year earlier.

Growth last year slowed from 4.1 percent in 2014, helping push inflation to a 16-year low of 0.1 percent and underscoring the Reserve Bank of New Zealand’s decision to cut interest rates last week. While the central bank expects the pace of economic expansion to pick up this year, Governor Graeme Wheeler said March 10 that the cash rate may need to fall further as the global outlook weakens and local inflation expectations sink.

New Zealand’s dollar rose after the GDP report and traded at 67.79 U.S. cents at 10:51 a.m. in Wellington from 67.35 cents immediately before the release.

Annual growth matched the pace in the third quarter, which was the weakest since late 2013. The RBNZ last week raised its forecast for annual growth through March 2016 to 2.6 percent from the 2.4 percent pace it projected three months earlier. It expects growth to accelerate to 3 per cent by March 2017.