WELLINGTON, May 21 (Reuters) - New Zealand economic activity contracted in the first quarter as high interest rates and rising food and oil prices hit domestic demand, a survey showed on Wednesday.
The National Bank of New Zealand’s regional trends survey, seen as a pointer to the official gross domestic product data due at the end of June, showed economic activity eased 0.6 percent in the three months to March, compared with a 0.7 percent rise in the previous quarter.
“The economy took a breather in the first three months of the year,” said National Bank economist Steve Edwards.
He said the result reflected a deterioration in various indicators, from business and consumer confidence to employment and the housing market, and suggested that GDP data, due on June 27, would be a negative reading.
Gross domestic product rose 1 percent in the fourth quarter, jumping from 0.5 percent growth in the September quarter, on higher business investment, increased dairy and oil exports.
But the economy has slowed sharply during in the first quarter of 2009, hit by a downturn in the housing market, high interest rates and surging food and energy costs.
The Reserve Bank of New Zealand said last month there were significant downside risks to the slowing economy, but it needed to keep rates on hold because of inflation concerns.
Following a series of surprisingly weak data, including jobs and retail numbers for the first quarter, most analysts expect the central bank to start cutting interest rates by September.
Overall nine of the country’s 14 regions surveyed showed a fall in activity, with Taranaki recording the biggest drop of 2.9 percent on previous quarter while the West Coast had the largest rise.
Auckland, New Zealand’s largest city and commercial centre, recorded a 0.2 percent fall in activity, and the capital, Wellington, declined 1.4 percent.
On an annual basis, the survey pointed to growth slowing to 1.9 percent in the March quarter from 2.6 percent in the previous quarter.
The bank uses 21 indicators, including building permits, retail sales, vehicle registrations, and consumer and business confidence, to determine an overall measure of economic growth. (Reporting by Kazunori Takada)
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