The drought earlier this year slowed economic growth in the June quarter, Statistics New Zealand figures showing gross domestic product (GDP) grew 0.2% in the three months to June, right on market forecast. The Reserve Bank had expectations of 0.4% growth.
The annual June growth rate was 2.5% and the average annual change was 2.7%.
Mr English said New Zealand's annual growth of 2.5% compared well with 2.6% in Australia, 1.6% in the United States, 1.4% in Canada, 1.3% in Japan, 1.5% in the United Kingdom and -0.5% in the euro area.
''While the June quarter was affected by a fall in agricultural production, down 6.4%, growing conditions since then have been good, business and consumer confidence have been high and the Canterbury rebuild continues apace.''
Those factors pointed towards relatively strong growth resuming in the September quarter, he said.
ASB economist Christina Leung estimated the effects of the drought to have been about 0.5%, slightly higher than expectations of a 0.4% drop in contribution.
That reflected a larger-than-expected fall in agricultural activity as a result of reduced milk production.
More recent milk production data pointed to a ''reasonably strong'' recovery in milk production in the three months ended September, given the earlier start to calving.
Beyond the effects of the drought, underlying growth appeared to be gaining momentum, she said.
Strong housing market and construction activity was reflected in stronger than expected growth in real estate services and construction sectors, construction activity in the quarter having been boosted by strong growth in infrastructure spending and roading.
Also, there were signs the effects of the stronger housing market and construction activity were flowing through to other sectors, Ms Leung said.
''In particular, there was further strong growth in professional services in the quarter, with the 2.6% increase building on the 3.9% increase in the previous quarter.
''Statistics NZ notes this growth was driven by an increase in architectural and engineering services, which was not region-specific. This suggests construction growth is broadening beyond the earthquake rebuild in Canterbury,'' Ms Leung said.
ANZ chief economist Mark Smith said the scene was set for a stronger second half of the year.
The strengthening labour market, rising net immigration and the housing market were expected to underpin increased consumer spending.
The mild winter was expected to lift dairy production and export activity, and the $40 billion Canterbury rebuild and lift in construction sector activity elsewhere were expected to filter through into wider economic activity.
''After allowing for drought impacts, it is clear base momentum is lifting, which is consistent with the spirit of the September monetary policy statement.''
GDP was still 1.1% below its peak in 2007. With indicators pointing ''firmly up'' for the second half of the year, the gap should rapidly close, Mr Smith said.
Council of Trade Unions economist Bill Rosenberg said it was good to see economic growth remaining positive despite the drought, but job growth was needed to reduce unemployment and joblessness.
With forecasts showing the unemployment rate not dropping below 6% this year, the 153,000 unemployed and 245,000 jobless meant a recovery was not a recovery unless it helped the people who needed it most, he said.
''We need more jobs with strongly rising wages that ensure wage and salary earners share in the growth.''
Mr English warned of risks and challenges remaining in the global economy, especially for New Zealand's trading partners.
