NZ grows at slowest pace in 5 years

New Zealand's annual growth rate has fallen to its lowest level in five years, with growth in the June quarter slightly down on economists' predictions.

Data published by Statistics New Zealand today showed the country's Gross Domestic Product (GDP) rose 1.9 per cent for the year ended June. That was the lowest annual growth figure since the year to June 2001, when the figure was also 1.9 per cent.

June quarter growth was 0.5 per cent, slightly down from the 0.6 per cent median prediction of economists who took part in a Reuters poll, and following 0.8 per cent growth for the March quarter.

The annual figure was bang on the economists' median prediction.

The growth rates were just ahead of expectations by the Reserve Bank, which had forecast an annual figure of 1.8 per cent and quarterly growth of 0.4 per cent.

In the March quarter annual growth was running at 2.2 per cent, while in the year to June 2005 it was 3.1 per cent.

Today's figures would seem to lessen the possibility the Reserve Bank could raise official interest rates next month.

The central bank held rates at 7.25 per cent this month, but warned it may have to raise them again if data did not show inflation pressures easing.

SNZ said today that service industries continued to provide much of the impetus for the economy.

The finance, insurance and business services group, together with government administration and defence, and personal and community service, had contributed strongly to the June quarter increase.

Strong growth in food, beverage and tobacco manufacturing, up 4.4 per cent, was also a factor in the quarter's increase, which had flowed through to strong meat and dairy product exports.

Construction activity decreased 6.5 per cent in the June quarter and was down 0.9 per cent for the year.

Construction trade services and residential building were both down nearly 10 per cent in the quarter, with non-building construction providing a partly offsetting increase.

Total domestic spending fell 1.7 per cent in the June quarter, as a result of decreases in business investment and household consumption spending and a reduced investment in inventories.

General government final consumption spending remained strong, up 1.2 per cent in the June quarter and 4.9 per cent for the year.

Business investment in fixed assets fell 5.6 per cent in the June quarter, but for the year it rose 5.5 per cent.

- NZPA