By Lucy Craymer
WELLINGTON (Reuters) -New Zealand's economy grew more than expected in the second quarter and dodged a technical recession, which will help the current government, under fire for its handling of the economy ahead of a national election.
Official data out on Thursday showed gross domestic product (GDP) rose 0.9% in the June quarter, higher than analysts' forecasts of 0.5%, and followed a revised 0.0% in the first quarter.
Flat growth in the first quarter means the country was never technically in recession.
Annual growth increased to 1.8%, Statistics New Zealand data showed, above expectations of 1.2%.
The New Zealand dollar hit an intraday high of $0.5952 before paring gains to be up 0.1% at $0.5932 following the data. Two-year swap rates jumped 12 basis points to 5.745%, the highest since 2008, but this was likely in part due to the U.S. Federal Reserve decision.
New Zealand's governing Labour party, which is struggling in the polls three weeks out from the Oct. 14 election, was pleased with the turnaround in the economy.
«Our economic plan is delivering a solid foundation to support New Zealanders dealing with the cost of living while investing in our recovery to build a stronger and more resilient economy,» Finance Minister Grant Robertson said in a statement after the release.
However, the stronger-than-expected expansion is likely to worry the central bank, which has said it needs slower growth to dampen inflation and inflation expectations.
That could result in rates being held at their highest in more than 14 years for longer than anticipated, economists said.
«Present headwinds mean we still expect the pace of activity to slow over the course of the next year, but the continued resilience of
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