New Zealand’s economy expanded the most in two years, beating expectations and driving the New Zealand dollar to a three-week high.

Gross domestic product expanded 1.0 percent in the June quarter, up from a 0.5 percent rise in the prior quarter, and was up 2.8 percent on the year, Statistics New Zealand said. Economists had expected quarterly growth of 0.8 percent and 2.5 percent annual growth, according to the median in a Bloomberg poll. The central bank was forecasting growth of 0.5 percent.

The New Zealand dollar jumped following the release, reaching 66.52 US cents, its highest level this month. It was at 66.12 cents immediately before the announcement and was recently trading at 66.35 US cents.

The strong data will likely ease some of the central bank’s concerns about weak economic growth and quell expectations that it could move to cut rates.  

Growth was broad-based with 15 of 16 industries recording higher production. Mining was the only industry to decline, due to an unplanned shutdown that stalled gas production.

Activity in the services industries – which account for about 66 percent of GDP – grew 1.0 percent in the quarter versus a revised 0.6 percent increase in the first quarter.

“Once again, service industries led growth. Goods-producing and primary industries also saw rises this quarter,” Stats NZ national accounts senior manager Susan Hollows said.

Growth in the retail trade and accommodation, wholesale trade and transport industries was helped by a combination of increased household spending and strong international spending, Stats NZ said.

Activity in the primary industries, which also includes forestry, logging and mining, rose 0.2 percent during the quarter, versus 0.6 percent in the prior quarter. The primary industries represent about 5 percent of GDP.

Agricultural activity jumped 4.2 percent – the strongest rise since September 2014 – primarily driven by increased milk production. The lift, however, was offset by a 19.9 percent fall in mining, the largest quarterly fall in almost 30 years due to an unplanned production cut at Pohokura, New Zealand’s largest gas field.

Forestry and logging activity rose 7.8 percent after falling 9.2 percent in the March quarter.

Within the goods-producing industries, which include electricity, gas, water and waste services, manufacturing and construction, activity rose 0.9 percent versus a 0.1 fall in the prior quarter.

Stats NZ said that both electricity and construction rebounded from falls in the March quarter. Electricity, gas, water and waste services lifted 3.7 percent after falling 0.6 percent in the prior quarter while construction was up 0.6 percent after falling 0.9 percent in the March quarter.

Total manufacturing was up 0.4 percent on the back of increased transport equipment manufacturing. In the prior quarter it had been up 0.6 percent.

On a per capita basis, GDP rose 0.5 percent in the June quarter, following a flat quarter in March. For the year ended June, GDP per capita grew 0.7 percent.

According to the statistics agency, per capita real gross national disposable income was up 0.4 percent following a 0.5 percent fall in the March quarter. In the year ended June, it was up 1.1 percent.

On an expenditure measure, GDP expanded 1.2 percent in the June quarter and 3.0 percent on the year.

The size of New Zealand’s economy in current prices was $289 billion, Stats NZ said.

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