Here are a few pieces of data received over the past five weeks worth reporting on here.
There was a net gain to New Zealand’s population from permanent and long term migration in November of 1,697 compared with a gain of 945 a year ago. That means the annual net flow is now a loss of just 1,567 compared with 2,319 in October and a peak of 4,118 in August. The average flow for the past ten years has been a gain of exactly 13,000 and the ten years before that 4,500 and the ten years before that a loss of 6,200.
One of the factors behind the change is an easing in the net loss across the Tasman to 38,846 from 39,330 in the year to October and a peak of 39,956 in August. The turnaround is a fairly slow one but it is likely to continue as demand for tradespeople in NZ grows and some of the allure of Australia eases off.
On December 27 I gave a radio interview regarding the 13.4% increase in spending processed by Paymark on Boxing Day. The questions were around whether this high rate of increase showed that Kiwi consumers had come out of their shells and 2013 would be an excellent year for retailers. For those in the building materials sector the answer is likely to be yes. But for the rest there is zero implication of positive – or negative nature – one can take from the Paymark data.
First, Paymark always release data in December showing how spending compares with last year. However when Statistics New Zealand used to produce monthly retail sales data there was seen to be very little correlation between the Paymark data and what the official data actually showed happened. Therefore I personally do not consider the Paymark data tell us what is actually happening with retail spending.
Second, even using the Statistics NZ Retail Trade Survey on a quarterly basis it is unwise to pay much attention to data broken down at the regional level. The sampling errors are simply too great – which is presumably why the monthly series for the country as a whole was eventually dropped. Therefore drawing conclusions about what is happening in Gisborne on the basis of Paymark spending data on the single day of December 26 being 20% up from a year ago is ludicrous.
Therefore I personally do not use the Paymark data as a reliable indicator of what is happening with household spending but I congratulate them wholeheartedly for being able to release something which attracts so much attention for so little effort – a marketers dream!
We do however have the Electronic Card Transaction data from Statistics NZ in hand now for December and it shows a seasonally adjusted spending rise for the month of 0.5% when we strip out automotive sectors. That makes for three rises in a row and annualised growth of 4.2% for the December quarter from just 0.6% for the September quarter. This data series is highly volatile and probably not much better an indicator than the Paymark data.
Therefore an improvement is underway of mild nature. With regard to retail spending for 2013, there is likely to be mild growth near perhaps 4% – 5% in nominal terms but the sector is still likely to see further restructuring and many retailers will be struggling with how to move away from the discounting model they have embraced over the past four years.
So how do we feel at the moment? Business sentiment as measured in the NZIER’s long-running Quarterly Survey of Business Opinion is firm and has improved over the past three months. A net 20% of non-farm businesses are optimistic about the economy over the next six months compared with just 8% in the September quarter survey. This reading was flat a year ago. However, one defining characteristic of the past three to four years has been generally good readings for consumer and business sentiment, and sometimes even good expressions of intentions to spend, hire, and invest. However when it has come to laying down cash people have baulked.
The NZIER survey shows that only a net 3% of businesses plan raising employment numbers. This reading has remained almost unchanged at this slightly below average level since the middle of 2009 and over that time jobs growth has been weak in NZ. Therefore the result does not yet suggest a surge in business hiring – hence one must be cautious about retail spending growth in the near future.
In similarly weak vein only a net 5% of respondents plan to boost capital spending in the near future. This is above the -2% average but not a decisive break from readings since the start of 2010 and therefore not suggestive of a capital spending surge.
The results overall suggest acceptable but not stellar growth in NZ in the near future – hence the common forecast of GDP growth near 2.5% this year. Imagine what it would be without the Christchurch rebuild!
And just as a warning. You might look at the sometimes popular measure on expectations for domestic trading activity. It jumped to a good reading of +22% in the December quarter from 9% in the September and June quarters. Sounds great right? Well the same measure in the four quarters of 2010 came in at 20%, 13%, 0%, then 15%. The NZ economy we now know however recorded another recession over the second half of 2010. So treat all these sort of measures with high caution. Like a number of other economic readings in New Zealand they are sometimes just crap!
On the consumer sentiment side things also look good with the monthly ANZ Roy Morgan index released today rising to 118 this month from 115 in December. But this measure was at 116 a year ago and I did not see retailers running bags stuffed with money to the banks last year therefore do not interpret this January’s reading as meaning happy days are here again for our shopkeepers. Just ask the Michael Hill people what gives. Personally I would play my retailing strategy still from the cautious/low inventory side.