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New Zealand's economy grew at a strong pace in the first quarter, but there were signs of a possible slowdown as higher interest rates started to bite, according to National Bank survey.
Its regional trends survey, seen as a pointer to official gross domestic product due late next month, showed activity rose by 1 per cent in the three months to March, compared with the previous quarter's 0.8 per cent rise. It was the survey's biggest quarterly rise since the third quarter 2005. The annual growth rate rose to 2.4 per cent from 1.8 per cent.
"This encompasses only one of the Reserve Bank rises, but out to the end of March things were still growing quite solidly over most of the indicators," said National Bank economist Steve Edwards.
"They'll be wary about some of those things being stronger than expected but it's hard to say whether they'll want to hike once more or not," he said.
Gross domestic product rose a slower-than-expected 0.8 per cent in the December quarter, for an annual rate of 1.5 per cent. First quarter data is due on June 29.
New Zealand's economy picked up speed after a slow period in the first half of 2006, prompting the Reserve Bank to resume raising interest rates in March, which it followed with a further rise in April.
"Some of the indicators are looking a little soft, there's flat dwelling approvals and consumer confidence is starting to turn, but it's still at a very high level," Edwards said.
The reserve bank's official cash rate is at a world-leading 7.75 per cent and it has singled out the hot housing market and strong domestic consumption as its main inflation concerns.
Fourteen of 16 economists surveyed by Reuters expect the reserve bank to hold rates on June 7, but to maintain a hawkish tightening bias.
Overall, 11 of the 14 regions surveyed showed a rise in activity, with Otago recording the biggest increase of 2.7 per cent on the December quarter.
Auckland recorded a below-average 0.7 per cent rise in activity. The Waikato region had the biggest annual growth rate of 4.3 per cent on a year earlier.
The bank uses 21 indicators, including building permits, retail sales, vehicle registrations and consumer and business confidence, to determine an overall measure of economic growth.
- REUTERS
