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Monthly Economic Indicators

Executive Summary

  • The unemployment rate fell to 4.8% as labour force participation declines.
  • Annual CPI inflation was 1.7%, lower than expectations.
  • House prices, and sales volumes fell, driven by weaker Auckland activity. Building consents fell slightly in the month but were broadly flat for the quarter.
  • Dairy export values rose, and Fonterra increased its forecast farmgate milk price for the 2017/18 season.
  • Internationally, the labour market puzzle of low wage growth despite the falling unemployment rate has continued.

The number of people employed fell by 4,000 (0.2%) in the June quarter, and the labour force fell by 6,000 people (0.2%), despite ongoing population growth. The number of unemployed fell by 3,000 leading to the unemployment rate falling to 4.8% from 4.9%. There was still little sign of building wage pressures, with annual growth in QES ordinary time hourly earnings lifting only slightly from 1.5% to 1.6%.

Consistent with low nominal wage growth, annual CPI inflation was lower than expected, at 1.7%. Measures of underlying inflation were also weaker, but firms’ pricing intentions are consistent with higher rates of inflation.

Conditions in the housing market continued to ease, with much of the weakness coming from Auckland, where house prices were down 0.6% from a year ago. Building consents were down slightly in the month and broadly flat for the quarter, consistent with a pause in building activity growth in 2017.

Dairy export values rose 11.6% in the month and Fonterra increased its farmgate milk price forecast for the 2017/18 season by 25 cents to $6.75 per kg of milk solids.

Internationally, headline inflation has continued to weaken around the world, partly driven by lower oil prices and low wage growth. The labour market puzzle of low wage growth despite a falling unemployment rate has continued globally. Economic growth has picked up in the US and the EU but has weakened in the UK.

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