The New Zealand economy is on an upward trend according to the Business NZ Economic Conditions Index (ECI) – an overall measure of the economy based on 33 key economic indicators.
Consumer confidence is growing with New Zealanders spending more as evidenced by an increase in electronic transactions and retail sales.
The rebuild in Christchurch combined with an overall improvement in the housing market means construction activity is booming.
Export prices have risen by 17.3 percent since May 2012, and economic growth is forecast to average 3 percent per annum out to March 2015.
These factors coupled with an improving global economic outlook and firm international commodity prices have given New Zealand businesses confidence that the economy is gaining momentum.
However, there are a number of concerns among all the positive indicators from this quarter.
Two of our biggest trading partners have fared quite differently in recent times – China’s projected growth rate has dropped slightly but not alarmingly over the last 18 months, while Australia’s has taken a considerable fall.
Household debt is increasing at a time when interest rates are at historic lows, providing a danger that households may get into trouble if the economy falters and interest rates inevitably rise.
Housing affordability remains a massive issue and it is unlikely that much will change until land supply improves. Renters are likely to suffer as the burden of the cost of housing will be passed down to them in the form of higher rental costs.
The ECI sits at 19 for the June quarter, up nine on the previous quarter and up 27 on a year ago.
The full Business NZ Planning Forecast for the June 2013 quarter can be found here.
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