• Economy grows 0.2 pct in June quarter, 2.6 pct on year ago
  • Data is in line with expectations
  • Previous quarter revised up marginally to 0.9 pct growth
  • Construction, manufacturing, wholesaling lead growth
  • Consumer spending, transport activity weaker
  • Financial markets narrowly picking Reserve Bank will raise cash rate to 3.0 pct next month

The economy has escaped significant damage from the Middle East war and spike in fuel prices with a modest rise in growth driven by stronger house building.

Stats NZ data showed gross domestic product (GDP) -- the broad measure of economic growth -- rose 0.2 percent in the three months ended June, to be 2.6 percent higher than a year ago. On an annual average basis the economy grew 1.7 percent over the year.

It had been expected New Zealand would dodged significant economic damage from the US-Iran war, caused by the fuel-price shock and disruption that dominated the quarter.

Stats NZ spokesperson Jason Attewell said the growth rate was a mixed bag.

"The 0.2 percent growth in economic activity ... reflects mixed results, with increases in nine of 16 industries."

Initial fears were the major spikes in petrol and diesel prices would all but wipe out the solid start to the year, sending consumers and businesses scurrying to cut costs and severely dampening activity.

BNZ senior economist Doug Steel said there has been a stronger than expected economic pulse.

Escaping an economic bullet

The quarter's growth was the fourth in a row, and annual growth rates were the highest in more than two years.

The surge in house building drove construction up 2.7 percent, while government services grew 2 percent, with wholesale trade especially for machinery and equipment rising 1.3 percent.

The weakest sectors were those strongly exposed to fuel prices.

Road transport and support services fell 1.7 percent, while retail trade such as hospitality and accommodation 1 percent.

Stats NZ said falls in fuel retail volumes pointed to the impact of higher fuel prices.

"Accommodation and food services fell 3.8 percent ... indicating a potential change in discretionary spending."

It also noted that household spending in restaurants and hotels also fell.

Services make up close to three quarters of the economy, but grew only 0.2 percent for the quarter, while goods producing sectors were up 1.3 percent overall.

Transport industries were also weaker coinciding with significant price increases for diesel.

Individual shares of the economy -- per capita GDP -- rose 0.1 percent for the quarter.

The country's purchasing power (disposable income) fell 0.4 percent for the quarter, to be 2.5 percent ahead of a year ago.

Derailed recovery?

Economists are expecting growth to continue unevenly through to the end of the year, and gather more momentum next year, with global events remaining a significant influence.

Business and consumer confidence have improved but still remain pessimistic with uncertainty driving caution, but with growth still occurring.

Forecasts are now picking modest growth going into 2027.

The Reserve Bank last month raised the official cash rate (OCR) at 2.75 percent and signalled rates will rise further to combat 4 percent inflation, although it has said it is also balancing the need to support the economic recovery.

New Zealand's quarterly growth rate was the weakest among key trading partners including the US, UK, EU, and Japan, and Australia.