WELLINGTON, June 20 (Reuters) - New Zealand's economy grew faster than expected in the first quarter but remained soft, with strong population growth masking just how weak it has been, and did not change the market's views on the interest rate outlook in face of sticky inflation.
Official data out on Thursday showed gross domestic product (GDP) rose 0.2% in the March quarter, slightly better than analysts' forecasts of 0.1% growth but in line with the central bank's expectation.
Annual GDP increased 0.3%, Statistics New Zealand data showed. The market had expected a 0.2% rise.
Westpac senior economist Michael Gordon said while the data was slightly above expectation, there was little in the detail that changed their view on the underlying weakness.
"We expect growth to remain minimal over the course of this year, and indeed recent indicators suggest that the June quarter is shaping up to be quite soft," Gordon said.
The New Zealand dollar rose NZ$0.6143 from NZ$0.6130 as the data came in close to expectations. Bond yields were slightly lower, but due to global pressures.
Statistics New Zealand data showed half of all industries grew, with the agriculture, forestry and fishing sector increasing 0.4%. Sectors including construction, business services, and manufacturing all declined.
ASB senior economist Kim Mundy said that strong population growth continued to mask just how weak the New Zealand economy over the last 18 or so months has been.
Annual GDP on a per capita basis was down 2.4%.
Mundy added that the first quarter GDP print will not change the story for the Reserve Bank of New Zealand (RBNZ), which warned in May that interest rate cuts were unlikely until far into 2025 as it battles inflation.
The RBNZ has undertaken its most aggressive policy tightening since 1999, when the official cash rate was introduced, lifting it by 525 basis points since October 2021 to 5.50%.
"After a prolonged period where demand exceeded supply, we need demand to remain below the economy’s productive capacity for some time to rebalance the economy and bring inflation sustainably back to target," Mundy said. (Reporting by Lucy Craymer; Editing by Sandra Maler and Sonali Paul)
