New Zealand economic growth misses expectations

Cows stand patiently as they are milked on a New Zealand dairy farm. New Zealand's economy grew a 'moderate' 0.5 percent in the January-March quarter as an increase in milk production was not enough to offset a slowing construction sector (AFP Photo/WILLIAM WEST) (AFP/File)

New Zealand's economy grew a "moderate" 0.5 percent in the January-March quarter, official data showed Thursday, falling short of market expectations as the construction sector slowed.

The gross domestic product (GDP) figure just missed analyst predictions of an 0.7 percent rise and was well off the central bank's 0.9 percent forecast.

"Much lower building activity combined with mixed results for the service sector took the shine off higher dairy production and saw a second quarter of moderate overall GDP growth," Statistics New Zealand said.

It said the result put growth for the 12 months to March 31 at 3.0 percent.

Construction was down 2.1 percent for the quarter, partially offset by a 4.3 percent rise in agriculture as milk production ramped up after a long slump.

Capital Economics analyst Kate Hickie said the slowdown in construction was likely to be short-term and the economy was set to continue to grow at 3.0-3.5 percent a year.

"Evidence from building consents issued suggests there is still a decent pipeline of construction work," she said.

"What's more, there are signs of strength in other areas of the economy."

Hickie said the data would not prompt the Reserve Bank of New Zealand (RBNZ) to move its cash rate from a record low of 1.75 percent.

"Taken together with the fact that core inflation is likely to remain weak for some time yet, we expect the RBNZ to leave interest rates on hold at 1.75 percent throughout 2017 and 2018," she said.