By Stephen Wright
WELLINGTON, New Zealand--New Zealand's economy accelerated in the second quarter, but faces a setback from a renewed Covid-19 outbreak that has shuttered the country's largest city.
The economy grew 2.8% from the first quarter after a 1.6% increase in January-March, underpinned by higher government spending, record-low interest rates and fast-rising house prices. The median forecast in a Wall Street Journal survey was for growth of 1.1%.
Analysts say the economy is likely to contract in the July-September quarter as Auckland, the largest city, has been in strict lockdown since Aug. 18 in response to New Zealand's first Covid outbreak since February.
However, they also expect the Reserve Bank of New Zealand to raise its cash rate from a record-low 0.25% in October as inflation is on the rise, spurred by stimulus policies, labor shortages and global shipping congestion--all brought on by the pandemic. The stronger-than-expected growth in the April-June quarter is likely to reinforce expectations for RBNZ rate increases.
The ecomomy grew 17.4% in the second quarter compared with a year earlier, when New Zealand's first lockdown of the pandemic caused a record contraction.
Write to Stephen Wright at [email protected]