"The cooling of growth in the June quarter, indicated by the latest National Bank Regional Trends Survey, is not unexpected and should be taken in context," Finance Minister Michael Cullen said today.

Average market expectations were for the gdp June data, to be released on 29 September, to show a mild 0.2 percent reduction in activity.

The two big factors driving this likely contraction were:

· a 15 percent quarter on quarter decline in milk fat production as dairy herds in the North Island dried off earlier than is usual at the end of the season · a correction of the statistical oddity which produced a 16.5 percent increase over the March quarter in residential building activity.

"Most commentators had been expecting the March figures to show a decline in the construction sector. Instead we got a sharp increase which will set the base for calculating the June quarter.

"But, even with the poor June result, the National Bank survey still showed strong annual growth for the June year. I expect the gdp figures to show a similar pattern," Dr Cullen said.

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