A flood of encouraging economic news

The latest retail statistics showed seasonally adjusted total retail sales values increased 2% in the March quarter, the largest increase recorded since the March 2007 quarter. Increased sales were recorded in all regions except earthquake-affected Canterbury (down 2.2%).

Vehicle-related industries were by far the largest contributors to the $324m increase in sales values: motor vehicles and parts retailing rose 5.9% ($110m) and fuel retailing was up 5.6% ($99m) despite higher pump prices. Core retail sales values rose 0.9% ($115m).

While those figures harked back to sales in the first quarter, the promise of continued pick-up was fortified by the Westpac-McDermott Miller consumer confidence index. From two-year low of 97.7 in the March quarter (reflecting the impact of February’s earthquake) the index rose in the June quarter to 112 (a reading above 100 indicates more optimists than pessimists).

Westpac chief economist Dominick Stephens said people’s perceptions of their own financial conditions have continued to improve and consumers were more confident about their own purchasing power: net 26% said it was good time to buy large household item, double the level in the previous quarter. An ANZ Bank-Roy Morgan survey on Wednesday also showed improving confidence, with consumer sentiment at its best level in five months.

Two reports from Business NZ kept the good news coming. The manufacturing sector continued its march towards stronger expansion in May, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index. The seasonally adjusted index for May was 54.7, up from 52 in April, with readings above 50 showing manufacturing is generally expanding. BNZ economist Doug Steel said the May PMI, the highest since May 2010, was further evidence of the economic recovery gathering momentum.

The BusinessNZ Planning Forecast for the June quarter incorporates the Business NZ Economic Conditions Index, which tracks 33 indicators and was up 10 from the March quarter and up 10 from year ago. Key factors underpinning that result include the continuing rise in world commodity prices and continued strong growth in New Zealand’s largest trading partners Australia and China. “Projections of 3% to 4% growth for 2012 and 2013 appear feasible,” the report said.

To cap it off, MAF has taken stock of the farm and horticultural sector with another bullish forecast for the next few years. It says the strength of demand coming through from emerging markets, the recovery in many developed economies, and continuing demand for agricultural resources for biofuel production has led it to revise upwards its view of medium-term international agricultural prices.

Beyond 2012, steady production growth and demand in dairy, forestry, wine and kiwifruit, together with an assumed depreciation in the New Zealand dollar, underpin strong forecast growth in export revenues, according to MAF.


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