20 August 2009

New Zealand economy shows signs of growth

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New Zealand's economy showed the first signs of growth in the second quarter after more than a year of recession, the National Bank of New Zealand said.

The New Zealand bank's regional trends survey, a rough pointer to official gross domestic product (GDP) data due at the end of next month, showed economic activity grew 0.4 per cent in the three months through June.

The result is the first rise in the survey since 2007 and reflected gains in business and consumer confidence, higher house sales, and lower interest rates despite a rise in unemployment.

"This is more focused on the domestic side of the economy but it's showing that the green shoots of recovery are starting to spread through the regions," said NBNZ economist Steve Edwards.

The official second-quarter GDP data is due on September 23.

New Zealand has been in recession since the start of 2008, and contracted 1 per cent in the first quarter to be 1 percent smaller than a year earlier. Forecasters expect the recession to extend into the third quarter, but in the past three months property prices have started to rise off multi-year lows and consumer spending has risen. In the past week both the manufacturing and services sectors have also reported improved activity.

On the downside, unemployment in the second quarter hit a 10-year high of 6 per cent.

The Reserve Bank of New Zealand has cut interest rates by a total of 575 basis points to a record low of 2.5 percent since July 2008, and is expected to keep them on hold and repeat its pledge to hold them there well into next year.

The bank's survey showed eight of the country's 14 regions surveyed showed a rise in activity, the strongest being a 2.4 per cent rise in the Bay of Plenty, followed by a 2 per cent rise in Hawkes Bay.

Auckland, New Zealand's largest city and commercial centre, recorded a 0.5 per cent rise in activity, while the capital Wellington was the worst performing, with activity down 0.7 per cent on the previous quarter.

On an annual basis the survey pointed to a contraction of 1.8 per cent in the June quarter.

The bank uses 21 indicators, including building permits, retail sales, vehicle registrations, and consumer and business confidence, to determine an overall measure of economic growth.


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