The economy has rebounded more strongly than expected as strong domestic spending and building offset the loss of international tourism.
Retail spending contributed to GDP growth. Photo: 123rf
Official numbers show gross domestic product (GDP) rose a seasonally adjusted 1.6 percent for the three months ended March, after it contracted 1 percent in the previous quarter.
Consensus forecasts were for growth between 0.5 and 0.7 percent, but predictions ranged between a fall of 0.6 percent a rise of 0.8 percent.
"After an easing of economic activity in the December quarter, we've seen broad-based growth in the first quarter of 2021," Stats NZ senior manager Paul Pascoe said.
"This is despite Auckland being in alert level 3 lockdown for 10 days, and continued border restrictions," he said.
GDP was 2.4 percent higher than the same quarter a year ago, with the annual average growth rate down to 2.3 percent.
The services industry, which makes up about two-thirds of the economy, grew by 1.1 percent, with strong contributions from the wholesale and retail trade sectors.
The construction sector grew by 6.6 percent over the past quarter, after declining in three months to December.
The biggest drag on growth were exports falling by 8 percent, reflecting the loss of spending from international visitors and students.
The strength of growth confounded economists, including the Reserve Bank, who had feared a much weaker even negative outcome, because of the absence foreign visitors spending freely during the peak summer season.
Finance Minister Grant Robertson said the Government's Covid-19 response was a reason for the stronger-than-expected bounce in GDP.
Robertson said the result was better than Australia, the United States, Canada, Japan and the United Kingdom and that the economy remained robust. However, the global situation remained volatile because of the pandemic, he added.
An economist said the numbers showed the economy firing strongly.
"We are spending and building our way out of the hole that covid created. Household consumption was surprisingly strong. Household confidence has grown, and the inability to travel offshore has funnelled spending locally," Kiwibank chief economist Jarod Kerr said.
He said the strength, if maintained through the year, might have the Reserve Bank thinking of earlier than expected interest rate rises.
The central bank has signalled rates starting to rise in the second half of next year, but Kerr said a start from May next year was possible.