Tony Alexander

Economic Commentaries

Economy not on a roll yet

Thursday April 19th 2012

Over the past fortnight we have seen the release of data showing growth in electronic card spending during the March quarter at less than one-third the average pace, falls in dairy prices which now sit one-third below peaks of early last year, but strong growth in dwelling sales and on-line job advertising, plus continuing good levels of business and consumer sentiment regarding the economy.

The economy remains on an upward path but there is no more reason now than there was one, two, or three years ago for believing we have reached the point where positive sentiment will translate into strong willingness to spend, hire and invest. Nevertheless, as this year progresses we expect to see accelerating growth in construction in Christchurch, extra catch-up residential building in Auckland, greater feed-through of high farm incomes into the cities (though note the falling dairy payout projections for 2012/13), and slowly improving comfort regarding debt levels.

Offshore the US economy is improving though not yet at a fast pace, China remains on track for a soft-landing, but across the ditch conditions are very tight in non-mining sectors while in Europe despondency regarding debt and growth has increased.

The Kiwi dollar remains above US 81 cents with woe in many places offshore likely to see the NZD still well supported this year. Wholesale interest rates have pulled back from peaks of a month ago and offer good hedging levels for borrowers.