Lots of life beyond dairy prices
by the quarterly survey of employers, slowed to 2.1 per cent in the March quarter, or 2.4 per cent for the private sector. But with inflation so low, that is still an appreciable pay rise in real terms.
Employment growth in the year to March was 3.2 per cent, which represents 74,000 more people in work.
The indicators of employment growth ahead have softened. But while both NZIER’s and ANZ’s business confidence surveys recorded some easing in hiring intentions, they remain at levels described as relatively solid and respectable. Job advertisements are trending down.
Meanwhile, it looks as though the Canterbury rebuild, which has been a major driver of growth, is at or near its peak.
But there is another way of looking at that: the rebuild will not be pulling in resources from the wider economy at the rate it has been. Given the backlog of building to be done in Auckland, that may be no bad thing.
Migration is a tailwind. The net inflow of permanent and long-term migrants was a record 58,300 in the year ended June, equivalent to 1.3 per cent of the population, boosting both the demand and supply sides of the economy.
Within that, the net loss of New Zealanders at 5600 over the past year was little more than a fifth of the average rate over the previous 10 years. So to the extent Kiwis are voting with their feet, it is a vote of (relative) confidence.
The survey indicators of consumer and business confidence have weakened, to multi-year lows.
It is worth noting, though, that in the details of these surveys respondents have tended to be more downbeat about the outlook for the economy than their own family’s or firm’s prospects, about which they are more authoritative.
It is worth remembering, moreover, that there is a base effect in the surveys. The starting point matters. People are asked if they expect things to get better or worse. If they are pretty good to start with, they may well think worse is more likely than better.
The BNZ-Business New Zealand performance of manufacturing index (PMI) is comfortably in expansion territory and rising. The equivalent survey for services (the lion’s share of the economy) is even stronger.
There is, of course, the everpresent risk that the other 99.8 per cent of the world economy will sideswipe us with some shock.
China, in particular, faces some challenges as it seeks to rebalance its economy from investment- to consumption-led growth. But the Asian giant’s direction of travel is fundamentally positive for an exporter of protein like New Zealand.
And if there are some grounds for concern about the world’s second largest economy, then the largest, the US, is looking better than it has for years. The kiwi dollar’s decline against the greenback is not just a reflection of weakening terms of trade on our part, but about an appreciating US dollar given the prospect the Federal Reserve will embark on the process of normalising US interest rates before the year is out.