The economy has posted stronger than expected growth in the second quarter as service industries and manufacturing lifted activity, and revisions to previous numbers now show the economy was not in recession at the start of the year.
Stats NZ data showed seasonally-adjusted gross domestic product rose 0.9 percent in the three months ended June, compared to analyst expectations of a 0.5 percent rise.
The March quarter's GDP figure was revised to 0.0 percent from the previous 0.1 percent fall, thus eliminating the technical recession.
Service industries, which make up two thirds of the economy, generally drove the increase, although household spending was soft.
Retail spending softer
"Business services was the biggest driver of economic growth this quarter, largely due to computer system design," Stats NZ senior manager Jason Attewell said.
Other industries supporting growth were public administration, safety and defence, rental, hiring, and real estate services, manufacturing, and utilities.
But retail spending was softer, as were primary industries and the construction sector.
The annual growth rate eased to 1.8 percent from 2.2 percent.
Westpac senior economist Darren Gibbs said despite the strength of the numbers, recent reports of the various sectors all pointed to weakness.
"The economy is growing at a below trend pace, as reflected in the gradual increase in the unemployment rate over the past year."
"With past monetary policy tightening steadily gaining traction as mortgages are refinanced, and low commodity prices now weighing on rural incomes, we expect the economy will continue to flirt with recession over the coming quarters."
He said the numbers were stronger than the Reserve Bank had been forecasting and it would likely be reviewing its monetary policy outlook.
Finance Minister Grant Robertson said government policies had been a factor in the stronger than expected growth.
"The Government's actions to build a stronger and more resilient economy contributed to higher than expected growth this quarter ... The economy is turning a corner and showing its mettle in the face of a deteriorating global environment and the impact of extreme weather events," Robertson said.