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Monthly Economic Indicators

Executive Summary

  • Economic growth picked up over the second half of 2015
  • The unemployment rate fell to its lowest in six years, although is not expected to be sustained
  • Inflation pressures remain weak
  • Global growth moderated in December

Key economic data released in February suggest positive momentum from the September quarter continued into the final quarter of 2015, although at a slightly slower pace of growth. Employment rebounded 0.9% in the December quarter, leading the unemployment rate to fall from 6.0% to 5.3%, and, while hourly earnings growth was only moderate, total labour incomes grew 6.0% in the year. That said, the unemployment rate fall appears to be overstated and associated with volatile participation.

Robust income growth, healthy consumer sentiment and a high level of visitor and migrant arrivals over the December quarter were positive for retail sales, with slightly higher real private consumption and/or services exports growth expected for GDP than in the Half Year Update. A continuation of the same factors is expected to support GDP growth in the first half of 2016 and poses slight upside risk to the Half Year Update forecasts.

Businesses continue to face limited pricing pressures, with their costs and prices (excluding large commodity price falls) flat over the December quarter. Construction costs continue to slow on an annual basis, which have been one of the few pockets of non-tradables inflation over the past couple of years. Soft business costs, along with lower inflation expectations and a slight easing in growth in unit labour costs, suggest inflation is unlikely to pick up substantially over 2016, particularly with the recent fall in fuel prices still to flow through to inflation.

Global data released in February showed that economic growth moderated in December, confirming the weakness reflected in markets at the beginning of 2016. Financial markets consolidated from mid-February as central banks signalled their willingness to support activity. However, some volatility has persisted.

This month's special topic looks at different weighting schemes for New Zealand's trading partner growth rate.

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