The latest update from the Treasury suggests the economic recovery is likely to weaken over coming months.The latest monthly update and summary from the government's main economic adviser says although the recovery is continuing, the next round of data is
The latest update from the Treasury suggests the economic recovery is likely to weaken over coming months.
The latest monthly update and summary from the government’s main economic adviser says although the recovery is continuing, the next round of data is likely to show a tapering off in growth.
The warning comes hours after the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research was accompanied by a cautionary words from the institute that expectations of recovery are getting ahead of reality.
The Treasury points to recent weak retail data and signs consumer spending is falling.
Add to that increases in long-term interest rates – and the assumption these will continue to rise from current comparatively low levels – along with higher petrol prices and higher unemployment.
Households also may be saving more and/or “de-leveraging” – paying off debt.
The housing market also appears to be slowing but the Treasury suggests this could be due to uncertainty over tax treatment of property investment and investors holding off until the Budget on 20 May when Finance Minister Bill English will announce changes in this area.
The economy is recovery more strongly than the Treasury forecast in its Half Yearly Update in December – but, as the NZIER emphasised this morning, the recovery is still not as strong as business (and consumer) mood surveys have shown people expect.
“This confidence has been driven by future expectations and may be more a reflection of how deep the recession was (relief factor) than how strong the recovery will be,” says the Treasury update released this afternoon.
