Housing up, construction and job ads down

A swag of economic data out this morning suggests the economy is still on Struggle Street.

Manufacturing sales volumes fell 0.7% over the quarter, much weaker than anticipated, said ASB Bank economist Jane Turner.

Although this follows two strong quarters, and there may be some correction, she said the declines in construction, manufacturing and wholesale trade offset other growth in retail and housing and means the outlook for GDP for the June quarter is lower than expected.

GDP figures are out on 22 September and the ASB economists forecast miserly 0.1%.

The poor result adds fuel to the argument there is no need for the Reserve Bank to raise the official cash rate when it reviews monetary policy on Thursday morning this week.

Meanwhile job advertisements as reported in the ANZ monthly survey fell 0.8% in August, driven by a massive 9.3% drop in newspaper advertising.

Newspaper job advertising is still, however , 10% above what it was a year ago, ANZ economists pointed out in releasing the data.

The drop follows two relatively strong months and the economists are still expecting job growth to rise.

“Our unemployment direction index, which aggregates a range of monthly labour market indicators including job ads, is also picking a mildly improving unemployment rate but may be turning.

“An improving labour market is a critical dynamic required to broaden the economic recovery. So far, so good on this front, but there are now some signs we could be running out of puff.”

The one piece of good news this morning was housing. The Real Estate Institute of New Zealand reported house prices rose 0.5% in August, with the number of sales rising from 4928 to 5192 and the number of days taken to sell dropping from 42 to 39 – the lowest reported this year.

Some of this, though, appears to be driven by housing shortages.

JP Morgan Australia and New Zealand economist Helen Kevans said this is likely to continue.

“We suspect...house prices will rise around 3% in this calendar year, owing mainly to persistent stock shortages. The worsening demand-supply imbalance will continue to put upward pressure on house prices, with gains likely to be dampened only modestly by expectations of higher interest rates.”