The economy expanded, just barely, in the June quarter, marking a technical end to the recession, though economists acknowledge it will not feel like much of a recovery while unemployment climbs.
Gross domestic product - a broad measure of the economy's output of goods and services - rose 0.1 per
cent, following five successive quarters in which it fell.
In addition, the March quarter was revised upwards, so that over the first half of the year GDP was about 0.5 per cent stronger than economists had thought. The financial markets responded to the surprise by driving the kiwi dollar higher, even briefly above US73c before it dropped to US72.60c last night, ironically undermining the chances of a sustained export-led recovery.
"While there is clear evidence the economy is turning the corner, the growth we are seeing is well shy of that needed to create jobs," said Bank of New Zealand head of research Stephen Toplis.
"So while many will celebrate the technical end of the recession there are still many more who will find themselves joining the dole queues as the unemployment rate climbs inexorably towards 7.5 per cent [from 6 per cent now]."
The primary sector led the way, especially forestry (up nearly 8 per cent on demand from China) and mining with the onset of full production from the new Maari oil field.
But manufacturers and builders continued to struggle. Manufacturing output fell 1.3 per cent to be nearly 14 per cent lower than a year ago, while construction was down 1.9 per cent in the quarter and 7 per cent over the year.
For residential construction the annual fall was 22 per cent. However, the boost to population growth from fewer New Zealanders leaving the country is expected to see a rebound over the coming year.
The services sector, which makes up more than two-thirds of the economy, was flat overall.
Statistics New Zealand cautioned that the June quarter figure was only just in positive territory. It could yet be revised into another negative as more data comes in.
But if the March quarter proves to be the bottom of the cycle, the recession will represent a cumulative peak-to-trough fall of 2.9 per cent, a little worse than the average 2.7 per cent of post-war recessions but less than the 4 per cent after the 1970s oil shock.
Economists expect the economy to continue expanding, by 2.7 per cent in the year to March 2011 and 3.4 per cent the year after.
"The real challenge is to achieve sustainable jobs and economic growth in the longer term," Finance Minister Bill English said.
"A return to the unbalanced growth of recent years could ultimately lead us back to where we are now. That is why we are focused on a recovery built on increased productivity, business investment and exports."
But Labour's finance spokesman, David Cunliffe, said the Government had done nothing to lead growth in the export and productive sectors.
"The engine room of the economy, other than dairy, is still sputtering. It's too soon to be overjoyed, particularly as unemployment lines will continue to lengthen over the next year."
