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Monthly Economic Indicators

Executive Summary

  • Recent data indicate the economy has grown at a reasonable pace so far in 2016, as employment increased strongly in the first quarter.
  • Retail spending growth was also solid, although there are hints the pace may ease in the second half of the year.
  • Trade data suggests the external sector has held up better than expected in the Budget Update, particularly the terms of trade.
  • Global financial markets stabilised in May with risks to the world economy declining to some extent.

Key economic data releases over the past month have confirmed that, for the most part, the domestic economy started 2016 on a solid footing. Jobs growth was strong in the March quarter, buoyed by a reasonable level of confidence in the outlook. High net migration inflows boosted labour supply growth, contributing to nominal wage growth remaining moderate.

Consumers maintained a healthy appetite to spend in the first quarter of this year, although easing consumer confidence might indicate a slower pace of household consumption growth in the second half of the year.  On the other hand, the renewed vigour in the housing market is likely to support consumer spending as household wealth rises. Tourist inflows continued to rise. 

The OTI goods terms of trade rose 4.4% in the March quarter, driven by lower fuel import prices. Goods import volumes were down 0.7%, with the contribution from net exports to GDP growth (released June 16) expected to be more positive than forecast in the Budget Update.

The inflation outlook remains weak, with costs faced by businesses low or declining and inflation expectations stabilising near record low levels. However, some pricing pressures appear to be emerging, with more firms expecting to increase prices, fuel prices rising, and hints of wage pressures emerging. Overall, it appears that inflation may be slightly higher than forecast in the Budget Update over 2016.

March quarter growth in our main trading partners was moderate but outturns have surprised commentators more positively recently, although risks to the outlook remain.

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