New Zealand's gross domestic product was up 1.4 percent in the third quarter of 2013 compared to the previous three months, Statistics New Zealand said on Thursday.

That beat forecasts for an increase of 1.1 percent following the 0.2 percent gain in the second quarter. It also marks the highest quarterly gain since the fourth quarter of 2009.

The strong increase in dairy production was the main contributor to a 17.0 percent rise in agriculture, the bureau said, which makes up about 5 percent of the New Zealand economy.

"Dairy farming has really bounced back from the drought this year," acting national accounts manager Steffi Schuster said. "The increase in agriculture is the largest in more than 25 years, as good weather boosted production well above the weak June quarter."

Dairy product manufacturing also increased this quarter, which contributed to a 1.5 percent rise in total manufacturing.

While manufacturing production was up, exports of dairy products fell in Q3, leading to a build-up of inventories. The NZ$770 million increase in total inventories this quarter is the largest build-up since the series began.

Increases in agriculture and manufacturing production were partly offset by declines in construction (down 1.0 percent), as falls in infrastructure and commercial construction outweighed an increase in housing construction.

Investment in housing was up 8.5 percent on quarter and business services were down 0.8 percent. Most of the sub-industries were down, except for architectural and engineering services.

On a yearly basis, GDP was up 2.6 percent - shy of forecasts for an increase of 3.3 percent but up from 2.5 percent in the previous three months.

The expenditure measure of GDP was up 1.1 percent in Q3, driven largely by investment in fixed assets (up 3.1 percent), increased imports of plant, machinery, and equipment. This was also reflected in a 4.5 percent rise in imports of goods and services.

Also driving the gains was a build-up in manufacturing and distribution inventories, as supply of goods exceeded demand this quarter.

The volume of spending by New Zealand households was up 0.4 percent, mainly due to increased spending on durables like furniture and motor vehicles, the bureau said.

RTTNews