20 Dec 2012

Economy grows more slowly than expected

9:40 pm on 20 December 2012

Economic growth was slower than expected in the three months to September.

Statistics New Zealand figures released on Thursday show Gross Domestic Product (GDP) rose by 0.2% in the September quarter.

It is the slowest quarterly growth since December 2010.

Statistics New Zealand also revised down its GDP figure for the previous quarter, halving economic growth in the three months to June from 0.6% to to 0.3%.

It has also cut its estimate for the March quarter from 1% to 0.9%, although it raised growth numbers for the three quarters before that.

The revisions show the country went into recession at the end of 2010 after production fell for two consecutive quarters.

In the three months to September this year, the biggest contributor to growth was construction, which had its best quarter in more than two years due to an increase in building and related services in Canterbury.

The biggest blow to growth in the quarter came from manufacturing and agriculture, with the latter posting its first fall in production in more than two years due to less milk being produced.

For the year, agricultural production was up by nearly a quarter after a strong first half.

On an annual basis, the economy grew 2.5% with the economy now worth $208 billion.

ASB chief economist Nick Tuffley said weaker milk production contributed to a fall in food processing, affecting the manufacturing sector. The mining sector was also weak.

The New Zealand dollar fell about a third of a cent against the US currency following the figures and at midday was trading at around US83.4 cents.

However, Minister of Finance Bill English says he is confident growth in the economy will pickup.

Mr English says the economy has come through the last year in not too bad a shape, given the pressures it faced.

The Labour Party however says the economy is suffering because of the Government's hands-off approach.

Finance spokesperson David Parker says the Government is standing idly by while jobs are lost and the country spirals further into debt.