GDP growth slower than expected

The economy, as measured by gross domestic product (GDP), grew 0.6 per cent in the December 2017 quarter, Stats NZ said today.

That took annual growth for 2017 to 2.9 per cent.

The New Zealand dollar fell to 73.05 US cents as at 10.50am from 73.30 cents immediately before the release.

Growth was driven by increases in the service industries but was tempered by falls in the primary sector.

Cattle and sheep farming and milk production were the biggest contributors to the decline, due to the wet spring and subsequent drought conditions in the second half of the quarter, Stats NZ said.

GDP was forecast to have expanded by 0.8 per cent in the December quarter from a year earlier, according to the median in a Bloomberg poll of 12 economists.

The Reserve Bank had projected quarterly growth of 0.7 per cent in the fourth quarter.

Westpac economist Michael Gordon did pick 0.6 per cent growth.

In his preview, he said this week's data would highlight a slowing in the New Zealand economy's momentum.

"With population growth still running strong at about 0.5 per cent a quarter, this would mark the second quarter when growth has been barely above zero in per capita terms," he said.

Gordon said there were no obvious one-off factors driving the quarterly result, "just modest growth across a range of sectors".

Stats NZ said: "Hot, dry weather appeared to have a negative impact this quarter on agriculture production, which fell 2.7 per cent. Falling milk production was reflected in lower dairy manufacturing and dairy exports. In contrast, meat manufacturing was up, keeping pace with export demand for meat products."

"Expenditure on GDP rose, underpinned by household spending and investment. Household spending was up 1.2 per cent, influenced by people eating out more and spending more on groceries and alcohol. This was reflected in the retail trade and accommodation industry, with activity in food and beverage services and supermarkets increasing."