New data shows economy holding up despite business gloom

The New Zealand economy is trucking on despite gloomy sentiments. Photo/123RF.

Two sets of data released today suggest the economy is holding up well despite low levels of business confidence.

New Zealand retail spending on electronic cards rose in August. Numbers were firmer than the market consensus, with the Government's Families Package and higher fuel prices the major catalysts, according to ASB economist Mark Smith.

And the ANZ's Truckometer - which uses traffic flows to gauge economic activity - showed slight increases in both light and heavy traffic.

"In broad terms growth in the Heavy Traffic Index is remaining in a respectable range. It certainly doesn't suggest the economy is falling into a hole," said ANZ chief economist Sharon Zollner.

Seasonally adjusted total retail spending on credit and debit cards rose 1 per cent after lifting 0.2 per cent in July, Statistics New Zealand said.

Core retail spending, which excludes vehicle-related industries, rose 0.7 per cent, after increasing 0.3 per cent in July.

The card data showed spending rose in all of the six retail industries in August.

Spending on fuel advanced 4.1 per cent while seasonally adjusted consumables spending, which covers grocery and liquor retailing, rose 0.6 per cent in the month. Spending on apparel such as clothing, footwear and accessories rose 2.6 per cent, after July's 1.8 per cent fall.

"Fuel prices rose in August compared with July, contributing to the lift in fuel spending," said retail statistics manager Sue Chapman. "Fuel spending on electronic cards has generally risen over the last year."

Actual total retail spending using electronic cards increased 6.3 per cent in August to $5.2 billion compared with the same month a year earlier.

Cardholders across all industries made 146 million transactions in the month, up from 143 million in July.

Westpac senior economist Michael Gordon said the 1.1 per cent gain in spending, including services, was ahead of market forecasts, though it was offset by a downward revision of the July growth to 0.2 per cent from the previous figure of 0.7 per cent.

"Growth in consumer spending has slowed in the last couple of years as the housing market has cooled. However, we've recently seen a boost to many households' disposable incomes via the Government's Families Package, which came into effect on 1 July,"
Westpac's Gordon said.

"And this extra assistance has tended to go to the households that are most likely to spend it. So we wouldn't be surprised to see a temporary lift in consumer spending over the second half of this year."

Meanwhile, ANZ's Zollner said a flattening off the Truckometer earlier this year was consistent with expectations that the economy had been losing some steam in the short term.

"However, it is encouraging that monthly growth has picked up again, lifting in three of the past four months," she said.

There was going to be a lot of focus on second quarter GDP numbers due later this month and a likely softening of growth, she said.

But with data already in for two out three months of the third quarter - the Heavy Traffic Index was looking supportive for the economy, Zollner said.

A consensus of economic forecasts released yesterday by the NZ Institute of Economic Research showed economists expect 2018-19 annual average GDP growth of 2.8 per cent - down from average forecast of 2.9 per cent in the June survey.

An average of 3.1 per cent growth in 2019-20 was down from the previous forecast 3.2 per cent.

The slight fall in economic outlook contrasts sharply with business confidence which has plunged to record lows this year.

- additional reporting BusinessDesk

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