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Monthly Economic Indicators

Executive Summary

  • Economic outlook for New Zealand continues to strengthen...
  • ...as the labour market improves more substantially, agricultural production rebounds from the drought, business and consumer confidence remains buoyant, and annual retail sales growth is robust...
  • ...contributing to emerging inflationary pressures
  • International outlook largely positive, albeit with risks, supporting market sentiment

The near-term outlook for the New Zealand economy continues to strengthen and it is among the fastest growing in the developed world. In the OECD's Economic Outlook released during the month, New Zealand's GDP growth is expected to rise to 3.3% in 2014, compared to the average growth for OECD nations of 2.3%.

The labour market has begun to pick up more substantially after stalling in recent years. Employment growth accelerated in the September quarter, driving a fall in the unemployment rate to 6.2%. Higher hourly wage rates and more hours worked each week led to robust growth in gross weekly earnings, with real (inflation-adjusted) wage growth also solid. Along with buoyant consumer confidence and increasing net inward migration, the improving labour market contributed to strong annual retail sales growth, with volumes rising 4.3% in the September 2013 year.

Growth is also becoming more broad-based. Indicators point to solid growth in the manufacturing sector, despite ongoing headwinds from an elevated NZD, while indicators for the wider service sector are also positive in response to strengthening household demand. In addition, the economy is recovering from the drought and business confidence is near 15-year highs.

While pricing pressures in the economy remain modest at present, there are signs that this is changing, as is expected with the economy beginning to grow more strongly and spare capacity being utilised. These pressures are becoming evident in inflation expectations, as well as producer and capital goods prices.

Internationally, developments in advanced economies were largely positive in November, led by resilient United States activity in spite of the October government shutdown, and lifted expectations of a December start to tapering, although March remains the most likely. China's outlook remained stable, although other emerging Asian economies were softer.

This month's special topic examines how the 2008-2013 recession and recovery compares with previous economic cycles in New Zealand’s history.

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