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New Zealand economy misses growth expectations on export drop
[WELLINGTON] New Zealand's economy grew more slowly than expected in 2016's fourth quarter as exports dropped sharply, mostly owing to heavy spring rain cutting dairy production.
Data from Statistics New Zealand on Thursday showed gross domestic product rose 0.4 per cent from the previous three months, below economists' forecast of a gain of 0.7 per cent.
The Reserve Bank of New Zealand had been looking for an increase of around one per cent from the previous quarter, so it might be disappointed by the figure.
October-December was the first period since April-June 2015 with quarterly growth of less than 0.7 per cent.
On an annual basis, the fourth quarter saw growth of 2.7 per cent, compared with the poll's 3.1 per cent forecast.
For all of 2016, New Zealand GDP grew 3.1 per cent, higher than the previous year's 2.5 per cent level.
Exports were hit hard by a 7.5 per cent fall in production for the country's top commodity, dairy. Manufacturing, mining and forestry exports also fell.
However a strong underlying domestic picture makes it unlikely the central bank will waver on its determination to keep rates at a record low of 1.75 per cent when it meets next week.
"The areas of weaker growth in Q4 are generally the more volatile components and we believe the underlying trend remains robust, albeit slightly softer than previously thought," ASB chief economist Nick Tuffley said in a research note.
The New Zealand dollar fell 0.4 per cent to US$0.7002 on the news, though it soon rebounded to US$0.7014. It had already jumped as much as 1.7 per cent as the US dollar tumbled after the Federal Reserve signalled a more gradual pace of monetary tightening this year than many in the market anticipated.
New Zealand's benchmark S&P/NZX 50 index was up 0.4 per cent.
New Zealand's economy has raced along for the past few years courtesy of an influx of migrants and tourists plus robust house building.
Statistics New Zealand also revised third-quarter growth down from 1.1 per cent to 0.8 per cent.