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New Zealand's Second-Quarter Building Approvals Decline, Curbing Growth
New Zealand’s home-building approvals declined in the second quarter, delaying a recovery in residential construction and curbing economic growth.
Permits dropped 6.6 percent in the three months ended June 30 from the first quarter, when they fell 0.1 percent, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. Excluding apartments, approvals rose 0.7 percent.
Less construction, falling consumer spending and slower immigration growth add to signs that New Zealand’s economic recovery is weaker than expected. Central bank Governor Alan Bollard yesterday said households are “cautious” and the pace of future interest-rate increases will likely be more moderate than he previously indicated.
“We had been expecting a sluggish construction recovery, but now we see more downside risks,” said Philip Borkin, economist at Goldman Sachs JBWere Ltd. in Auckland. “The recent disappointing consent numbers are just one piece in a list of evidence that suggests the Reserve Bank should be removing stimulus only gradually.”
New Zealand’s dollar was little changed after the report, buying 72.46 U.S. cents at 11:45 a.m. in Wellington from 72.45 cents immediately before the release. The two-year swap rate dropped to 3.98 percent, the lowest since September, extending its largest weekly decline in nine months. The rate, a fixed payment made to receive floating rates, is sensitive to central bank monetary policy.
Interest Rates
Bollard yesterday raised the official cash rate to 3 percent from 2.75 percent. There is a 68 percent chance of another quarter-point increase on Sept. 16, according to a Credit Suisse index based on swaps trading.
House sales fell for a third month in June and it took longer to sell a property, according to Real Estate Institute figures published July 14. A separate report the same day showed retail sales excluding vehicles and fuel declined for a second month in May.
Annual immigration growth slowed in June for a fifth straight month, according to government figures released July 21. Bollard yesterday said the decline will “act to further dampen consumer spending” and domestic demand.
In June, approvals rose 3.5 percent following a 9.5 percent decline in May, today’s report showed. Still, the underlying trend in approvals is rising at about 0.6 percent a month, less than the pace in May, the statistics agency said.
Economists prefer to look at figures excluding apartments, because apartment approvals are volatile. There were 57 consents for apartments in June, up from 27 in May, the agency said.
Excluding apartments, approvals rose 1.7 percent in June following a 10 percent slump in May.
The value of approvals for home building and renovations increased 32 percent in June from the year-earlier month to NZ$508 million ($368 million), today’s report showed.
The value of non-residential building approvals in June slumped 26 percent to NZ$228 million. The quarterly trend series for non-residential approvals dropped 15 percent in the three months ended June 30 to a six-year low.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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