New Zealand growth almost stalls

22 September 2011 Last updated at 02:09 GMT About 180 people died in the February earthquake in Christchurch and many businesses were affected New Zealand's economy slowed to almost a standstill last quarter, sending the currency sliding.

Gross domestic product rose 0.1% in the three months to June, compared with the previous quarter, according to Statistics New Zealand.

It comes after a surprise acceleration in the first three months of the year despite a devastating earthquake.

The dollar slid as investors bet the weak figures mean the central bank will keep interest rates steady.

The data came in significantly below expectations, with the Reserve Bank of New Zealand projecting 0.6% growth in the three months to June.

Overstated?

However, analysts warned that the numbers may be giving a skewed idea of economic growth for the year so far.

"The data likely overstates the weakness in the economy, much like how the strength in [the first quarter] was overstated," said Khoon Goz of ANZ.

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There are risks globally but unless confidence in other things start sliding there is no other reason why we won't have a solid second half”

End Quote Robin Clements UBS Between January and March, the economy grew by 0.9%, said Statistics New Zealand.

"A more accurate picture is likely that the economy expanded at an underlying rate of 0.5% a quarter, which is in line with our view of where trend growth is."

The New Zealand dollar fell three quarters of a cent against the US dollar in early trade to $0.7975 from $0.8050.

Recovery on track

Thursday's data showed strength in the financial and farming sectors, but falls in construction and manufacturing.

Financial markets have been cautious of the continuing debt crisis in the eurozone weighing on an improving economy in New Zealand.

But analysts said they expect growth to return in the second half of the year.

"There are risks globally, but unless confidence in other things start sliding there is no other reason why we won't have a solid second half," said Robin Clements from UBS.

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