23 Dec 2009

NZ dollar falls as GDP rises

11:46 pm on 23 December 2009

The New Zealand dollar is trading below 70 US cents for the first time in three months.

The latest Gross Domestic Product (GDP) figures show the economy expanded by 0.2% in the three months to the end of September, building on growth of 0.2% in the June quarter.

However, the two quarterly increases follow five quarters of contraction. The economy contracted overall by 2.2% during the 12 months ending in September.

The dollar fell on the news to below 70 US cents for the first time in three months. The Trade Weighted Index stood at 64.31on Wednesday evening.

Statistics New Zealand says the continued growth in the last quarter has been driven by real estate and business services.

Mining also contributed, with big rises in both extraction and exploration activity.

In contrast, work on building sites slowed, with construction activity recording its sixth decrease in the last seven quarters.

Consumer spending was up, with 2% rise in spending on big ticket items such as electrical appliances and cars.

Spending on non-durables, such as alcohol and food, was down by 0.8%.

The Reserve Bank had tipped the overall growth rate for the period would be twice as much as it was.

Economist predict continuing growth

ASB economist Nick Tuffley says the economy is expected to recover steadily after sharp falls as a result of the global financial crisis.

He says the current - or fourth - quarter will see growth of the same amount as the September quarter.

"So we're looking at a figure of around half a percent growth and then the economy continuing to gradually pick up some momentum over 2010."

UBS senior economist Robin Clements says the market had hoped for a stronger recovery.

"But my biggest fear was that we might have got a rogue result with a minus on the front of it and then there would have been doubts about whether the economy was recovering at all.

"Whereas at least we've dispelled that, and we're on track for the recovery which will gather some momentum into the new year."

He says it is a relief to know the economy is expanding.

On Monday, New Zealand recorded its first quarterly balance of payments surplus in more than 20 years.