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Monthly Economic Indicators

Executive Summary

  • The latest indicators point to continuing momentum in the economy in early 2013.
  • Drought impacts aside, domestic factors look robust for the June quarter too.
  • Widening global growth differentials prompt realignments in financial markets.

After a strong finish to 2012, the latest signs point to ongoing momentum in the economy in early 2013. ANZ’s regional activity index put in another strong showing in the March quarter, supporting the Budget forecast of solid 0.7% March quarter real GDP growth and, if anything, suggesting that the risks are on the upside. The GDP figures will be released on 20 June.

The strong showing in the ANZ indicator was owing in part to the pronounced turnaround in the Household Labour Force Survey in the March quarter. Following the weakness at the end of last year, employment jumped by 1.7% in the latest release – the largest quarterly increase on record – and the unemployment rate fell to a three-year low of 6.2%. While recent volatility in the survey is expected to remain a feature in coming quarters, the result brought it more in line with other labour market indicators including the Quarterly Employment Survey. Overall, the outcome reinforces the picture in the Budget forecasts of a subdued, but strengthening, labour market. This month’s special topic takes a closer look at recent trends and developments in the youth labour market. Although 15-19 year olds were particularly adversely affected by the global financial crisis, their participation in education has increased.

Underlying measures of wage growth have weakened in recent quarters, although increased demand for labour has resulted in an offsetting increase in the number of hours worked. As a result, annual growth in weekly gross earnings has continued to outpace CPI inflation. The moderation in CPI inflation in recent quarters has boosted real wage growth and has lent additional support to households. The solid 0.5% increase in retail sales volumes in the March quarter points to ongoing private consumption growth in early 2013, albeit at a slower pace than the surge in the December quarter and in part a response to discounting by retailers.

Turning our attention to the current quarter, domestic factors appear relatively robust. Consumer confidence climbed to a three-year high in May and indicators from the manufacturing and services sectors point to continued expansion in activity too. While the lingering impacts of this summer’s drought will detract from growth in the middle of the year, impetus from the Canterbury rebuild and the buoyant housing market are expected to help GDP growth to gather momentum going into 2014.

Fresh from hitting a post-float high in April, a more positive outlook for the US economy has prompted a realignment in the New Zealand dollar and other global financial markets over the past month. The latest developments could be a turning point in the outlook for the US economy and for the value of the New Zealand dollar.
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