Tony Alexander

Economic Commentaries

Labour Market Weak

Thursday February 9th 2012

This week we have released results from our two monthly surveys. The Confidence Survey shows sentiment up marginally to a net 13% positive about the economy over the coming year from just 3% in December – a positive result but hardly stellar. But in addition all eight of the main measures in our BNZ-REINZ Residential Market Survey moved up quite firmly this month. More and more first home buyers are entering the market and investors appear to be stepping up to the plate as well. Agents now perceive sellers to have greater power than buyers and price perceptions have shifted further upward.

Yet at the same time we saw data released this morning showing that after rising only 0.1% in the June quarter and 0.2% in the September quarter job numbers in New Zealand rose only another 0.2% in the December quarter. 0.5% jobs growth during a period when the Rugby World Cup was meant to be driving much extra economic activity is a very weak result which will rightly leave already stressed retailers fearful for the first half of this year.

This result along with 0% growth in debit and credit card retail spending over the December quarter, falling dwelling construction consents and falling car registrations shows NZ consumers still have their hands in their pockets. But before one gets too pessimistic it pays to note that economic cycles in new Zealand usually start with a farming upturn and with tractor registrations running 14% ahead of a year ago in the past three months and farm sales up 65%, we think it remains valid to buy into an accelerating growth profile. But with European and UK growth prospects weak, the Kiwi dollar pushing toward US84 cents, and Christchurch rebuilding getting pushed into 2013, forecasting above trend growth does not appear justified for 2012.