21 Jun 2013

GDP growth lower than expected

9:57 am on 21 June 2013

Official figures suggest the economy grew at only half the pace economists had expected in the March quarter though most say the underlying recovery is still intact.

The Government Statistician says the economy expanded by 0.3% in the three months ended March. The market had expected as much as 0.7% growth.

The figures show the expected boost from the Canterbury rebuild was offset by the drought's impact on agriculture.

Deutsche Bank economist Darren Gibbs says he suspects the March figure understates actual growth and the 1.5% growth recorded for the December quarter probably overstates that period's growth.

He says taking the two quarters together implies a solid pick up in activity.

Bank of New Zealand economist Craig Ebert says there was nothing in the figures to alter the underlying picture.

He says more general economic indicators, particularly from business surveys, still tend to be positive and on that basis Bank of New Zealand has bumped up its view on the second quarter's growth to 0.5%.

Mr Ebert says that does not sound like a lot of momentum but are reasonable results given the first and second quarters had a lot of negative influences from the drought.

"If we look at some of the broader indicators we are still of the view that growth is fundamentally picking up and we'll probably be running closer to a 3% pace by the end of the year."