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Falling commodity prices slow New Zealand economy

Xinhua, June 18, 2015 Adjust font size:

New Zealand's economy grew slower than expected in the quarter ending March, prompting analysts to forecast another interest rate cut next month.

Gross domestic product (GDP) rose by 0.2 percent in the March quarter, down from 0.7 percent in the previous quarter, the government statistics agency said Thursday.

The lower growth reflected a 2.9-percent fall in primary industries, the largest fall since September 2010, according to Statistics New Zealand.

"Oil and gas were big factors in the lower GDP growth this quarter," national accounts manager Gary Dunnet said. "There was less extraction and exploration, as international prices fell."

Agriculture fell by 2.3 percent in the March quarter, dragged down by lower milk production.

Forestry production and exports of forestry products were also down.

A 2.4-percent increase in retail trade and accommodation helped to offset the decrease in primary industries.

Possible contributors to retail trade and accommodation includes the 2015 Cricket World Cup, which New Zealand co-hosted with Australia, and more visitors during Chinese New Year than in the past.

International tourist spending in New Zealand was up 2.3 percent in the March quarter.

Despite lower quarterly growth, annual GDP growth was still strong at 3.2 percent.

The size of the economy was 239 billion NZ dollars (165.17 billion U.S. dollars) for the year ended March.

An Economic Note from the ASB Bank said the quarterly growth was weaker than the market's median expectation of 0.6 percent.

It said the figures would be a "significant surprise" to the Reserve Bank of New Zealand (RBNZ), which cut the official cash by 25 basis points to 3.25 percent earlier this month and signaled another possible cut in September.

"We now expect this rate cut to come in July rather than September," said the Economic Note.

Finance Minister Bill English said the figures showed solid, sustainable economic growth that had seen 74,000 jobs created in the past year, and average annual wages rising faster than inflation.

"The lower dairy output was in line with Treasury's forecasts, which see the economy continuing to grow at around 2.8 percent on average over the next four years," English said.

"This results highlights that New Zealand is closely tied to international markets, and risks are ever-present." Endi