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Monthly Economic Indicators

Executive Summary

  • Domestic demand has displayed steady growth over the first half of 2011.
  • Rugby World Cup, the earthquake rebuild and the high level of the terms of trade will underpin short-term prospects.
  • However, global developments are leading to slower trading partner growth, thus dampening New Zealand’s overall growth outlook.

Domestic demand has displayed steady growth over the first half of 2011, reflected in higher household spending growth than expected in the Budget and the labour market consolidating recent gains. 

Employment was flat for the June quarter, leaving it 2.0% ahead of June 2010.  Moreover, hiring intentions are positive, pointing to further employment growth in the second half of 2011.

With support from the labour market and income from the high terms of trade, household spending growth continued its momentum from the March quarter into June.  Spending rose across most categories with purchases of durables consistent with improving consumer confidence.  This confidence extended into the September quarter, indicating further consumption growth over the rest of the year. 

Short-term prospects are positive with local drivers the Rugby World Cup (RWC), the earthquake rebuild and the high level of the terms of trade underpinning growth.  In August, the estimated number of international RWC visitors was revised up by 10,000 to 95,000.  Christchurch is gearing up for the rebuild though most of the construction may not commence until 2012.  While export commodity prices may have peaked, they remain high and will help underpin income in the short-term.

However, against this strong backdrop, global developments are leading to slower trading partner growth, thus dampening New Zealand’s growth prospects, particularly for the export sector.  Consensus forecasts of New Zealand’s trading partner growth have declined for 2011 and 2012 and we expect further reductions before we finalise our forecasts for the Pre-election Update. This global backdrop will continue to shape New Zealand’s overall growth outlook.

This issue does not contain a Special Topic, but we review recent data against Budget forecasts and look ahead to the Pre-election Update, and include an expanded discussion of international developments.

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