WELLINGTON (Reuters) -- New Zealand's economy grew much faster than expected in the first quarter as the country recovers from a pandemic-induced slowdown, affirming a view that monetary policy conditions may tighten sooner than previously expected.
Gross domestic product (GDP) rose 1.6% in the three months through to March, Statistics New Zealand said on Thursday, well above a Reuters poll forecast of 0.5% growth and the Reserve Bank of New Zealand's (RBNZ) estimate of a 0.6% fall.
The bounce back came after New Zealand reported a 1.0% fall in GDP in the final quarter of 2020. Annual GDP rose 2.4%, Statistics New Zealand said, compared with analyst expectations for a 0.9% rise.
The better than expected GDP figures pushed the Kiwi dollar up 0.3% to around $0.7073.
A solid rebound in construction activity and strong domestic spending more than offset the loss of international tourism over the summer period, Kiwibank Chief Economist Jarrod Kerr said in a note.
"As the markets digest today's strong report, we should see expectations shift toward an earlier lift-off in the official cash rate than the Reserve Bank has scheduled," said Kerr.
The GDP data is in line with stronger than expected results recorded across several key indicators in recent months including jobs growth and retail trade volumes.
This encouraged the Reserve Bank of New Zealand (RBNZ) in May to signal a move away from stimulatory monetary policy settings adopted during the COVID-19 pandemic, one of the first advanced economies in the world to do so.
New Zealand's success in curbing the coronavirus pandemic allowed it to reopen its domestic economy and establish a safe "travel bubble" with neighbouring Australia, boosting employment and consumer spending.
It rebounded from recession with a revised 13.9% quarter-on-quarter GDP growth in the three months to end-September last year. That more than reversed an 11% drop in the preceding quarter as the country observed strict lockdown measures.