New Zealand's domestic economic growth has been hampered by the low agricultural production in the second quarter, which could put more pressure on the central bank to keep borrowing rates unchanged, initial figures by the country's statistics office showed.

Statistics New Zealand figures showed in Wellington today that farm production has slowed by 2.1 percent in the second quarter as the country's biggest milk producing province of Waikato was affected by a drought in April. This also prompted manufacturing especially of dairy products to drop by 4 percent during the period, the statistics agency reported.

Analysts said the nation's only saving grace during the period is the tightening of supply in the global markets, which would impact on prices of leading New Zealand exports like dairy.

Fonterra's gain

In a separate statement, Fonterra Cooperative Group Ltd. Chief Executive Officer Andrew Ferrier said: Global "dairy supply and demand are moving more in balance at prevailing prices."

Ferrier said the good prices could lead to higher fees due to farmers.

Consumer spending holds

During the second quarter, the report showed that consumer spending was generally steady as purchases of food, liquor and non-durables remained, consumers did not spend much on air travel, telephone calling and medical visits. Durable goods such as furniture, appliances were also notably low.