(Bloomberg) -- New Zealand’s economy grew less than expected in the final quarter of 2017, reinforcing bets that the central bank is in no rush to raise interest rates. The kiwi dollar fell.
Gross domestic product gained 0.6 percent in the fourth quarter from the third, when it also rose 0.6 percent, Statistics New Zealand said Thursday in Wellington. Economists expected 0.8 percent growth, according to the median estimate in a Bloomberg survey. From a year earlier, the economy expanded 2.9 percent, less than the 3.1 percent forecast.
While the economy has been expanding at a healthy clip, inflation has remained subdued and the central bank has cut interest rates to a record low. A slump in business confidence after the September election may have curbed investment and damped growth early in 2018. The Reserve Bank signaled in February it would keep the official cash rate at 1.75 percent until mid-2019, and traders see just a 40 percent chance of a hike before the end of this year.
“We expect a temporary slowdown in growth over the first half of 2018 due to initial uncertainty following the recent change in government,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “But the details in fourth-quarter GDP are encouraging and lift our confidence that economic growth will recover over the second half of this year.”
The New Zealand dollar fell a quarter of a U.S. cent on the report and bought 73.1 cents at 11:33 a.m. in Wellington. It’s climbed 7 percent against the greenback over the past three months, helping to damp the inflation outlook by suppressing import costs.
Dry weather curbed milk production in the fourth quarter, with farm output falling 2.7 percent from the third quarter, today’s report showed. Still, business services such as computing grew 2.3 percent and there was a pick up in retail spending and real estate services.
Other details from Thursday’s GDP report:
- Manufacturing fell 0.1% after a drop in dairy processing
- Construction rose 0.7% led by non-residential buildings
- Exports were unchanged while imports rose 3.9% amid demand for capital equipment, including aircraft
- Measured by spending rather than output, GDP grew 0.4% from the third quarter
- GDP per capita rose 0.1%, slowing from 0.2% in the third quarter
(Updates with economist’s comment in fourth paragraph.)