The Claytons Recovery – the recovery you have when you're not having a recovery – looks likely to be with us for some time.The latest New Zealand Institute of Economic Research quarterly predictions show the domestic economy heading sideways.&
The Claytons Recovery – the recovery you have when you’re not having a recovery – looks likely to be with us for some time.
The latest New Zealand Institute of Economic Research quarterly predictions show the domestic economy heading sideways.
“The recovery is slowing … There is sufficient momentum and stimulus in the economy to avoid a repeat recession, the institute’s principal economist Shamubeel Eaqub says.
“But the economy will be soft in the next six months.” Retail and non-residential construction will be the worst hit, the institute predicts.
Firms should reassess their risk exposure, hiring and investment plans accordingly, he said.
The institute is picking GDP growth of 2.2% for this year, slowing to 1.2% in 2011, before rebounding to 2.9% in 2012.
“Our view reflects a cautious attitude from households and businesses, slowing net migration and an impending slump in non-residential construction.”
The non-residential construction sector is “at the precipice of a collapse,” he said. Construction work usually lags building consents by a year and 12 months ago the amount of consents, by size, fell by a third.
“This alone may put around 20,000 construction sector jobs at risk.”
Retail is almost as badly off. The institute is picking any consumer spendup between now and October to beat the GST rise will be disappointing and does not expect the run up to Christmas to be much better.
“A slow recovery in jobs and wages, and debt repayment will dampen spending for some time. Impending food price increases and other one-off costs will offset the personal tax cuts for the lower half of income earners.”
