The New Zealand economy remains fragile, with falling dairy production and weak confidence set to weigh on activity.
The country's economy grew 0.4% in the three months ended June to give annual growth of 2.4%, Statistics New Zealand figures released yesterday showed.
The Reserve Bank and financial markets were expecting quarterly growth of 0.6% and 2.5% quarterly and annual growth respectively.
Annual average growth for gross domestic product (GDP) was 3%.
ASB senior economist Jane Turner said economic growth was slowing as construction and manufacturing activity peaked.
Increasingly, services must pick up the pace to provide some offset and there had been encouraging signs.
The BusinessNZ performance in manufacturing index remained elevated.
Within the GDP result, there were signs of strong tourist spending and robust demand for business services.
However, for the second quarter it was not enough to return growth to trend, with falls in wholesale trade and transport dragging on overall activity, she said.
The economic outlook remained fragile.
ASB had revised down its growth forecasts for late this year to mid-2016 in light of lower dairy production.
ASB expected a 5% fall in dairy production this season.
''Although dairy prices have lifted faster than expected in recent weeks, rural confidence is expected to remain low, which will continue to drag on investment and consumer demand in rural regions.''
Wider confidence continued to fall and threatened broader investment and employment intentions.
A lower New Zealand dollar and lower interest rates should help prop up momentum - the sooner the better, Ms Turner said.
The OCR was still expected to be cut a further 0.25% but timing was a close call between October and December.
The Reserve Bank was not necessarily in a hurry to deliver the final cut.
