New Zealand's economic growth has risen in the second quarter, and revised figures show the country has avoided a technical recession.
GDP expanded 0.9 percent in the April-June quarter, Statistics NZ data showed, outpacing the 0.5 percent growth predicted by most economists. First-quarter growth was also revised up slightly to 0 percent from -0.1 percent.
Despite the Reserve Bank's (RBNZ) interest rate hikes of 525 basis points from the end of 2021 to May this year, household consumption still expanded 0.4 percent - although that is lower than March's 1.5 percent.
Growth in Government spending was also up to 2 percent from flat on the back of Cyclone Gabrielle and other severe weather events earlier this year.
Broken down by categories, business services expanded 2.1 percent on a quarterly basis.This was largely due to a rise in computer system design and related services, Stats NZ said.
Growth in public administration, safety and defence also more than doubled to 2.8 percent, driven by public order, safety and regulatory services.
Meanwhile, agriculture, forestry and fishing contracted 2.3 percent on a quarterly basis - on the back of last quarter's 0.8 percent shrink.
Nonetheless, ASB economist Nathaniel Keall said the GDP figures were "substantially-stronger-than-expected".
Keall said strong services activity - up 1 percent - also helped power economic growth over the quarter.
Overall, the economy was holding up better than expected, said Finance Minister Grant Robertson. He maintained the Government's actions "to build a stronger and more resilient economy" contributed to the growth.
"Annual growth stood at 3.2 percent, with the size of the economy at $395 billion, bigger than it was pre-COVID," said Robertson.
He pledged the Government's economic plan would deliver "a solid foundation to support New Zealanders" amid the ongoing cost of living crisis.
However, ASB predicted growth to continue slowing in the next 12-18 months.
"The RBNZ has signalled a high hurdle to further OCR (official cash rate) moves in either direction and most forecasters still expect NZ's growth to slow from here," Keall said.
"Still, there looks to have been a meaningfully higher level of economy activity than the RBNZ expected as of the end of Q2, considering the quarter's data and the revisions to past quarters.
"The RBNZ will be watching more timely indicators over the coming weeks and months. At the least, the continued resilience in activity highlights the risk that OCR settings will need to remain tight for a prolonged period to get inflation back into target."
