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Monthly Economic Indicators

Executive Summary

  • Data releases over August pointed to robust demand in the household sector for the June quarter, supported by solid growth in jobs and employment income
  • Other indicators continue to point to a slower pace of expansion ahead, consistent with the Pre-election Economic and Fiscal Update (PREFU)
  • Uneven growth was evident across major overseas economies, while geopolitical risks continue to weigh on global markets

Data released over August indicated robust demand in the household sector for the June quarter with retail sales pointing to an expected bounce-back in private consumption growth. Conditions in the labour market lent further support, with employment growth sustained in the quarter and total gross earnings rising solidly. However, spare capacity in the labour market continues to be reduced as the unemployment rate declined.

Other indicators continue to point to a more moderate pace of expansion ahead than in recent quarters. Business and consumer confidence, while elevated, are below the peaks achieved earlier this year, consistent with tightening monetary conditions, slower rates of house price appreciation, and a weakening in dairy prices.

That said, the pace of economic growth is still expected to be above trend and inflationary pressures are likely to gradually build given that spare capacity has been exhausted. Growth will continue to be supported by the Canterbury rebuild and elevated domestic demand as the net inflow of external migrants remains high.

Dairy prices have continued to decline from their peak in February and are beginning to flow through to the trade data in the form of a decline in export values.  It is assumed that dairy prices will stabilise and improve later this year as seasonal factors reverse and Chinese stock levels decline.

Growth in the major economies was uneven in the June quarter: GDP expanded strongly in the US, but stalled in the euro area and contracted in Japan, and Chinese activity appeared weaker going into the September quarter. Differences in the economic outlook of the major economies have also been reflected in their contrasting monetary policy stances. Meanwhile, financial markets have been affected by geopolitical risks. 

All told, developments remain consistent with the forecasts presented in the recently released PREFU, although a mix of upside (net migration) and downside risks (dairy prices) persist.
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