NZ economy posts surprise growth

September 23, 2009 04:06:10 PM

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New Zealand showed signs of emerging from recession on Wednesday but officials said growth was so slight it did not mark a definite turning point in the economy.

Statistics New Zealand said gross domestic product rose less than 0.1 percent in the three months to June following five quarters of contraction.

Finance Minister Bill English said the data showed the economy was stabilising, but the country remained well short of a strong recovery that would lead to sustainable jobs and growth.

"While growth for the June quarter is only marginally positive and could still be revised downwards, it shows the economy is through the bottom of the trough and is stabilising," English said.

"However for most people the real measure of recession is unemployment, which is expected to keep rising for some time yet."

English said much of New Zealand's growth in recent years was based on a diet of consumer debt and government spending which left the country with serious structural imbalances and an underpowered export sector.

For the year to the end of June, the economy shrank 1.8 percent, compared with 2.5 percent growth in the year ending June 2008.

It marks the biggest annual decline in economic activity since 1987.

However, the June quarter turnaround surprised many economists, with predictions of a 0.2 percent contraction.

Activity in the primary industries was up 1.5 percent in the June quarter, mainly driven by forestry and logging, which rose 8.0 percent on the back of increased exports to China.

Goods-producing industries contracted 0.5 percent with construction down 1.9 percent and manufacturing down 1.3 percent.

ASB Bank chief economist Nick Tuffley said New Zealand's expected economic growth in the second half of the year remained weak and there was the possibility of another negative quarter over the next year.

"The recovery is going to remain fragile in the initial stages, business profitability will remain under pressure, and unemployment will continue to rise further," he said.

The release of the GDP data saw the New Zealand dollar leap from 71.90 US cents to 73.15, its highest level in more than a year, but within a few hours it had eased back to 72.64.