* Q2 GDP +0.4 pct, +2.4 pct yr/yr
* Growth from agriculture, mining activity
* Transport has largest fall in 6 years
By Charlotte Greenfield
WELLINGTON, Sept 17 (Reuters) - New Zealand's economy bounced back from a quarterly two-year low as the agriculture and mining sectors picked up, although annual growth continued to ease, leaving the central bank with room to cut rates further.
The economy grew a seasonally adjusted 0.4 percent in the quarter, according to Statistics New Zealand, slightly below economists' forecast of 0.5 percent but well above the previous quarter's 0.2 percent.
The annual growth rate eased to 2.4 percent from 2.7 percent in the previous quarter. Economists had expected 2.5 percent.
"In a nutshell the GDP output is not as rosy as the Reserve Bank was expecting," said Nick Tuffley, chief economist at ASB.
"We still think the Reserve Bank will have to cut by another 25 basis points. It's is a pretty tight call between October and December; the lift in dairy prices has been quite substantial, but that's coming at the cost of weaker production."
The New Zealand dollar NZD=D4 initially fell to $0.6335 from around $0.6375 before the announcement, while rate futures were slightly lower on the day.
The Reserve Bank of New Zealand (RBNZ) last week downgraded its forecast for GDP to 2.1 percent in March 2016 from 3.2 percent in its previous monetary policy statement in June.
The RBNZ cut its benchmark interest rate by 25 basis points to 2.75 percent and said a further economic slowdown in China, New Zealand's biggest trading partner, could lead to more rate cuts if it weakened growth in the island nation.
Eight of the 13 analysts polled expected the RBNZ to cut rates by 25 basis points next month and most believed rates would stay on hold throughout 2016 at 2.5 percent.
Agriculture and mining supported the economy's growth in the second quarter with agriculture up 3 percent, while mining rose 2.5 percent.
Agriculture rose on increased dairy production, as well as beef and lamb farming, as the sector recovered from a drought earlier in the year.
Mining rose on an increase in oil and gas extraction as the Tui Oilfield returned to full production after a partial shutdown in the first quarter.
Services growth was mixed with business services up 2.3 percent, but transport falling 1.8 percent, its largest quarterly fall in six years, because of reduced road transport and related support business.
Construction increased 0.8 percent, led by infrastructure building, while residential building declined.
Growth was expected to slow in coming months as falling global dairy prices slashed farmer incomes and began to reverberate through the economy, and while construction work rebuilding earthquake-hit Christchurch plateaued.