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Monthly Economic Indicators

Executive Summary

  • Risks stemming from the European debt crisis have increased as the focus shifts from Greece to Spain.
  • However on the back of strong March quarter GDP, domestic data point to further modest gains in the June quarter.
  • Global developments in June have dragged down consumer and business confidence as well as the export sector.
  • Overall, with the established growth momentum and the earthquake rebuild picking up, we expect annual growth to increase over the next year.   

The growth outlook for our major trading partners deteriorated in June and risks associated with the euro debt crisis increased.  Improving sentiment following the positive outcome of the second Greek election was short-lived as the focus of the crisis shifted quickly from Greece to Spain.  Spain’s euro area partners provided funds to support its ailing banking sector, but the move had little effect with interest rates on government debt rising further.

Against the backdrop of a worsening global outlook, a strong real GDP outturn for the March 2012 quarter provided welcome local relief.  Annual average growth in the year to March 2012 of 1.7% was close to the 1.6% Budget 2012 forecast and the 1.8% Budget 2011 forecast. 

Domestic data, particularly housing sales activity, show that momentum has continued into the June quarter.  Household electronic card spending posted solid gains in April and May, indicating that household consumption is bouncing back following a post Rugby World Cup slowdown.  Moreover, service and manufacturing data indicated expanding sector output.  Reflecting this improving activity, core Crown tax revenue in the ten months to April 2012 came in above Budget 2012 forecasts.   

However, global developments dragged down household and business sentiment in June.  In addition, the export sector is already reflecting weaker trading partner growth with the terms of trade falling and the current account deficit widening in the March quarter.

Overall, with the established growth momentum and the earthquake rebuild expected to quicken in pace in the second half of the year, we expect annual growth to increase over the next year.  However, global developments will mean that while the general direction for growth is up, there will be ups and downs along the way.

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