WELLINGTON, March 25 (Reuters) - New Zealand's economy grew at its fastest pace in two years in the December quarter driven by growth in inventories and consumer demand, backing views the central bank will start raising rates around the middle of the year.
Gross domestic product rose a seasonally adjusted 0.8 percent in the three months to Dec 31, the third consecutive quarter of growth after five quarters of contraction, official data showed on Thursday. The third-quarter was revised upward to 0.3 percent from 0.2 percent.
Economists polled by Reuters had forecast a 0.8 percent rise, while the Reserve Bank of NZ had predicted a 0.6 percent gain.
'It's likely to keep reinforcing the middle of this year that the RBNZ has been signalling, so we're of view that June is the more likely start to the tightening cycle,' said ASB chief economist Nick Tuffley.
The New Zealand dollar was largely unmoved by the data holding at around $0.7015/20 level. Interest rate futures were also unchanged.
Growth in the December quarter was driven by recoveries in manufacturing activity and wholesale trade. Both sectors had fallen in the previous seven consecutive quarters.
Domestic consumption, which makes up around 60 percent of the economy, increased 0.9 percent, while inventories were built up after three quarters of run downs.
The data is likely to underscore the Reserve Bank of New Zealand's stated policy of keeping rates at record low of 2.5 percent until at least the middle of the year.
Financial markets are pricing in around a 12 percent chance of a rate rise on April 29 but rises are expected in each of the five reviews from June onwards.
A Reuters poll, conducted before the GDP release, showed 11 of 16 economists picking the first rise in June, with one seeing an April rise and four a third quarter hike.
Market pricing and analysts' expectations of a rate hike have shifted to mid year or later from as early as January after a slew of weak data.
The housing market recovery has stalled over the past few months, which along with a weak labour market, rising mortgage rates and potential tax changes have seen cooling activity.
The prospect for a pick up in retailing was dented this month by data showing February electronic card retail sales for the month fell 0.4 percent as consumers kept spending in check.
Reflecting the tepid recovery, the amount of tightening seen over the next 12 months has steadied around 170 basis points from a peak of 241 basis points in late October and a low of 139 basis points early this month.
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232;
Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net Keywords: NEWZEALAND ECONOMY/GDP (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Gross domestic product rose a seasonally adjusted 0.8 percent in the three months to Dec 31, the third consecutive quarter of growth after five quarters of contraction, official data showed on Thursday. The third-quarter was revised upward to 0.3 percent from 0.2 percent.
Economists polled by Reuters had forecast a 0.8 percent rise, while the Reserve Bank of NZ had predicted a 0.6 percent gain.
'It's likely to keep reinforcing the middle of this year that the RBNZ has been signalling, so we're of view that June is the more likely start to the tightening cycle,' said ASB chief economist Nick Tuffley.
The New Zealand dollar was largely unmoved by the data holding at around $0.7015/20 level. Interest rate futures were also unchanged.
Growth in the December quarter was driven by recoveries in manufacturing activity and wholesale trade. Both sectors had fallen in the previous seven consecutive quarters.
Domestic consumption, which makes up around 60 percent of the economy, increased 0.9 percent, while inventories were built up after three quarters of run downs.
The data is likely to underscore the Reserve Bank of New Zealand's stated policy of keeping rates at record low of 2.5 percent until at least the middle of the year.
Financial markets are pricing in around a 12 percent chance of a rate rise on April 29 but rises are expected in each of the five reviews from June onwards.
A Reuters poll, conducted before the GDP release, showed 11 of 16 economists picking the first rise in June, with one seeing an April rise and four a third quarter hike.
Market pricing and analysts' expectations of a rate hike have shifted to mid year or later from as early as January after a slew of weak data.
The housing market recovery has stalled over the past few months, which along with a weak labour market, rising mortgage rates and potential tax changes have seen cooling activity.
The prospect for a pick up in retailing was dented this month by data showing February electronic card retail sales for the month fell 0.4 percent as consumers kept spending in check.
Reflecting the tepid recovery, the amount of tightening seen over the next 12 months has steadied around 170 basis points from a peak of 241 basis points in late October and a low of 139 basis points early this month.
((mantik.kusjanto@thomsonreuters.com; +64 4 471 4232;
Reuters Messaging: mantik.kusjanto.reuters.com@reuters.net Keywords: NEWZEALAND ECONOMY/GDP (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.