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Monthly Economic Indicators

Executive Summary

  • The economy continued to expand at a solid pace in the June quarter - rising 0.7% -   although growth eased from the above-1% pace in the preceding three quarters.
  • The terms of trade declined from their peak in the March quarter, contributing to a fall in nominal GDP and a reduction in the quarterly goods surplus.
  • The annual current account deficit narrowed further - to 2.5% of GDP - as the drought-affected quarter in 2013 dropped out of the annual calculation.
  • International economic7 developments continue to point to uneven growth across major economies.

Data released over September showed the economy continued to expand at a solid pace in the June quarter, broadly in line with the Pre-election Economic and Fiscal Update. The outlook for real GDP growth remains solid, albeit at a slower pace than over the past year, but will be supported by strong population growth.

Activity indicators showed some mixed results through September, with business confidence sliding further, but firms' own activity outlook and other details were more encouraging. Analysts noted that pre-election uncertainty may explain some of the divergence between the fall in confidence and own-activity expectations. Housing market activity was also softer in August.

Nominal GDP declined in the June quarter, as the terms of trade fell from their March quarter peak. Further dairy price declines, combined with a marginally softer near-term outlook for inflation, mean the outlook for nominal GDP growth has softened. That said, the currency has depreciated rapidly in the past week with confirmation that the RBNZ intervened in currency markets. It is too early to assess the impact of these recent movements in the exchange rate, but we would expect higher tradable inflation and some support for the tradable sector.

The fall in export receipts also contributed to a decline in the seasonally adjusted quarterly goods surplus, but the annual goods surplus widened as the drought-affected quarter in 2013 dropped out of the annual calculation, driving a narrowing in the annual current account deficit to 2.5% of GDP.

International economic developments continued to point to uneven growth across the major economies. A more entrenched recovery in the US and the UK, led primarily by domestic demand, is expected to lead to monetary tightening in the first half of 2015, while the ECB eased policy to support growth and price stability. A positive US growth outlook and high geopolitical risks led to a stronger USD and contributed to the decline in the NZD.  

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