The full pdf version of the Weekly Overview is contained here.
Weekly Overview 1 June 2017
Thursday June 1st 2017
This week we note how house building has plateaued in Auckland, failure of retailers in spite of strong growth in consumer spending, growth in big versus less big cities, and a strengthening in business plans to hire people and boost capital spending.
Data this week show housing turnover falling but household retail spending accelerating. We look at the numbers and consider implications for some property prices of an over-supply of sub-dividable sections in Auckland and the role emotion plays in housing cycles.
The Reserve Bank surprised the markets today not by leaving the cash rate unchanged at 1.75%, but failing to adopt a tightening bias (warning of rate rises) which most expected. That has caused the NZD to fall close to US68 cents but doesn’t change the risk that bank lending rates will continue to edge slowly higher while lending rules get tighter and tighter.
House building is growing in Auckland but at a very slow pace which will see the existing shortage get worse for the next few years – or decades. But outside Auckland and Canterbury a rapid supply response is occurring. That has implications for prices in locations with low (if any) population growth. The labour market remains very strong and firms which have been struggling to find staff are going to find things even tougher going forward.
With the week again interrupted by a public holiday the Overview is once more a tad on the light side. All we do is discuss the migration numbers and take a look at the recent small decline in the NZD to just below US69 cents.
We learnt this morning that the inflation rate has risen to 2.2%. But one key measure of core inflation still sits at just 1.6%. And with the absence of any sign of accelerating growth in wages outside the construction sector, while inflation near to above 2% beckons for a couple of years, the Reserve Bank are likely still to feel they have time on their side. The first official cash rate rise is still more likely toward the middle of next year than this year sometime.
The next Overview after this one will appear on April 20. This week we take a fairly simple look at a couple of recent business sentiment surveys, and look at data reaffirming what we already know about the Auckland housing real estate market slowing down. Nothing much really. Enjoy Easter.
This week’s Overview is a bit of a mish mash with commentary on household debt, cows, and US fiscal policy. If you’ve got something better to do go do it as there isn’t much new really. That is sort of the story for our economy overall at the moment – well underpinned by tourism, construction, migration, etc. and none of the recent new things we have learnt seem to be big enough to alter what lies ahead to any large degree.
This week we note the record net migration gain this past year of 71,333 people and examine the numbers behind the change from -4,000 five years ago. A big influence on flows is the relative state of the NZ and Australian labour markets with one indicator being that since 2009 88% of net new jobs in New Zealand have been full-time, but in Australia this proportion is only 54%.