NZ economy expands in 4Q, quake to hit 2011 growth

[March 24, 2011]  WELLINGTON, New Zealand (AP) -- New Zealand escaped recession in the final quarter of 2010 despite a destructive earthquake, but may be unable to avoid its economy shrinking this year following a second more damaging temblor last month.

The nation's gross domestic product grew 0.2 percent in the three months ended Dec. 31, Statistics New Zealand said Thursday. The economy contracted by 0.2 percent in the previous quarter. A recession is commonly defined as two consecutive quarters of decline.

The first quake hit the southern city of Christchurch in September. The same city was struck by the second more destructive quake on Feb. 22 and killed at least 166 people in one of New Zealand's worst disasters.

Economists say the second quake will further reduce growth through the first half of 2011. With 10 percent of the country's economic production hit by the temblors, New Zealand could slip into recession this year.

Statistics New Zealand said a rebound in manufacturing during the last quarter of 2010 was mostly offset by falls in other sectors .

The economy grew 1.5 percent for the whole year, in a weak recovery from a recession that began in late 2008 and last five quarters.

Finance Minister Bill English said the flat second half of 2010 reflected the first earthquake and the caution of consumers as they increased savings and paid down debt amid stuttering growth.

He said there were reasons to be optimistic about growth picking up later this year, including record high commodity prices for dairy and log exports, low interest rates and inflation, and a likely boost to construction coming from rebuilding after the second Christchurch earthquake.

[Associated Press]

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