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Monthly Economic Indicators

Executive Summary

  • Employment growth led to a lower unemployment rate of 4.9%
  • House prices were fairly flat, while sales and consents fell
  • Dairy export values were up 35% from a year ago and Fonterra increased its Farmgate Milk Price
  • High net migration, visitor numbers and employment growth led to retail sales growth of 1.5% (sa) in March
  • Internationally, support for interest rate rises is increasing in the US and EU, though ECB officials continue to downplay expectations.

The number of people employed rose by 29,000 (1.2%) in the March quarter and migration driven population growth saw the labour force increase by 23,000 people (0.9%). With employment growth outstripping labour force growth, the number of unemployed declined and the unemployment rate fell from 5.2% to 4.9%. However, there was little sign of wage pressures building, and while employment rose, a large proportion was in part time roles, with total hours worked falling 0.6% (sa).

House prices were fairly flat, while sales and consents fell in April. Annual net migration remained at 71,900, and the May ANZ business confidence index for residential construction lifted 12% to a net 45%, providing some support towards expectations of future growth in consents.

The situation for dairy farmers continued to improve, with an increase in export values of 9.1% in the April month and an increase of 35.4% from a year ago. Strong GDT auction prices contributed to Fonterra increasing its Farmgate Milk Price for the 2016/17 season to $6.15 from $3.90 last season, and opening next season with a forecast of $6.50.

The combination of high net migration, high visitor numbers, employment growth, and recovering farm incomes lead to an increase in retail sales of 1.5% (sa) in the March quarter.

The US Federal Reserve remained on hold in May though strong data continues to provide support for increases in the near term. The USD has continued to fall in the month as the Trump administration’s ability to implement its pro-growth agenda becomes more uncertain. European Central Bank officials are continuing to talk down expectations of a change to monetary policy. Meanwhile tensions continue to rise between the UK and EU, in regard to Brexit, with UK elections fast approaching.
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