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Monthly Economic Indicators

Executive Summary

  • Economy grew modestly in mid-2012 but stronger growth ahead
  • Inflation pressures remain weak
  • Internationally, market sentiment has improved but fiscal concerns continue to weigh on the growth outlook.

The September 2012 quarter GDP release confirmed that the economy grew modestly in the quarter. The release also contained revisions to previous quarters that showed activity was more subdued in the June quarter but grew more strongly over 2011. Indicators of GDP for the fourth quarter of 2012 and the first quarter of 2013 point to firmer growth rates than experienced through the middle of the year.

Lower than expected inflation in the December quarter reflected the ongoing influence of a strong New Zealand dollar, falls in commodity export prices over much of the year and subdued domestic demand. The influence of these factors, particularly the latter two, is expected to fade over 2013 and inflation is forecast to rise towards 1.8% by the end of 2013 from 0.9% at the end of 2012.

Global market sentiment has improved significantly in the new year, driven by the avoidance of the US fiscal cliff and a pickup in macroeconomic data, particularly in Asia. Global equity markets have approached or reached five-year highs, while bond yields in Italy, Spain and Portugal have moderated since late last year. However, while sentiment has improved, global growth is still expected to be slightly below trend in 2013, as fiscal consolidation weighs in advanced economies and rebalancing in Europe continues. The outlook remains consistent with the Treasury's Half Year Update (HYEFU) trading partner growth forecast of 3.4% for 2013.

This month's special topic looks at a new breakdown of New Zealand's external debt data, published by Statistics New Zealand as part of the September quarter Balance of Payments release. It supplements the existing published data and allows us for the first time to directly compare our external debt position with international data compiled by the World Bank.

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