New Zealand GDP Growth Slows to 0.2% but Beats Forecasts

New Zealand's economy expanded at a slower pace in the second quarter, but the result still came in ahead of expectations, offering some reassurance to policymakers worried about downside risks.

Gross domestic product rose 0.2% in the June quarter compared with the previous three months, Statistics New Zealand data showed on Thursday. That was above the 0.1% increase analysts had predicted and better than the Reserve Bank of New Zealand's projection of no growth, though it marked a deceleration from the 0.8% expansion recorded in the first quarter.

On an annual basis, GDP climbed 2.6%, exceeding market expectations of a 2.2% rise.

Westpac senior economist Michael Gordon said the figures reinforced the view that the economy had "largely held its ground through the US-Iran conflict, though it hasn't been completely unscathed". He noted the data should help ease some central bank committee members' concerns about downside risks to growth, while adding that inflation indicators remain key to the bank's next move.

The New Zealand dollar edged up to US$0.5724 from US$0.5718 following the release, though the currency continues to face pressure after the Federal Reserve's decision to raise rates.

Statistics New Zealand spokesperson Jason Attewell described the results as mixed, with only nine of the 16 industries recording growth. Construction was the largest upward contributor, rising 2.7% in the quarter, while transport, postal and warehousing posted the biggest decline.

The data comes after the central bank raised the official cash rate by 25 basis points earlier this month to 2.75%, its second consecutive increase, as inflation remained above its target range. The bank has said it expects the recovery to strengthen and become more broad-based after a prolonged period of weakness.

Kiwibank economists said that while the second-quarter outcome was solid given the oil crisis, New Zealand still recorded the smallest growth among the nine other countries and country groups Stats NZ uses for comparison. They cautioned that the path for the rest of the year would depend largely on whether momentum carried into June continues.

With a general election set for November 7, the economy has become a central battleground. The ruling coalition, elected three years ago on a promise to revive growth, is facing an opposition Labour Party campaigning on measures to ease cost-of-living pressures for middle-income households, with no clear winner yet emerging in the polls.