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NZ to post meagre growth in 3rd qtr as construction drags

NZ to post meagre growth in third quarter as construction drags

Dec. 20 (BusinessDesk) - New Zealand may have recorded meagre economic growth in the third quarter in the face of a weak construction sector, patchy manufacturing and sluggish consumer spending.

Gross domestic product probably grew 0.2% in the three months ended Sept. 30, according to a Reuters survey of 15 economists. That would continue the pace of the second quarter, when growth was a quarter of the expected level. Annual growth may have slowed to 1.8% from 1.9%.

Financial markets have wound back expectations for a revival in economic growth in an economy that has struggled to pick up pace since emerging from recession last year. Reserve Bank Governor Alan Bollard, who has forecast third-quarter GDP at 0.3%, will keep the official cash rate unchanged until at least June 2011, according to a separate Reuters survey.

"The pace of the economic recovery remained slow amid lacklustre domestic spending in the third quarter," said Brendan O'Donovan, chief economist at Westpac, in a report.

Construction "probably had a terrible quarter" led by residential building, he said.

The value of residential building work put in place dropped 5.3% to $1.65 billion in the third quarter while commercial construction slipped 0.7%, according to government figures this month.

Bollard said this month that any increases in the official cash rate will be "more limited" over the next two years than was signalled in September. He cited tepid company investment, weak household spending and slowing housing market activity.

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The GDP data is due for release on Dec. 23. The previous day, Statistics New Zealand releases the balance of payments report for the third quarter in what is a typical pre-Christmas rush of data.

The current account deficit may have widened to 3.4% of GDP in the third quarter, still a relatively benign level historically. The gap probably swelled to $2.32 billion in the quarter for an annual deficit of $6.49 billion.

The Balance of Payments improved through the downturn of the past couple of years as a weak domestic economy sapped demand for imported goods while demand in Australia and China helped underpin export receipts.

(BusinessDesk)

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