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New Zealand Manufacturing Decline Signals Weaker Second-Quarter Expansion
New Zealand manufacturing sales volumes slumped to a 10-year low in the three months through June, signaling economic growth may slow in the second quarter.
Manufacturing sales excluding inflation, a measure comparable to figures used in the gross domestic product calculation, declined 1.8 percent from the first quarter, Statistics New Zealand said in a statement in Wellington today. Sales excluding the meat and dairy industries fell 3.6 percent.
The data adds to the case for central bank Governor Alan Bollard to leave the official cash rate unchanged next week after he boosted borrowing costs at the previous two meetings. A Credit Suisse index based on swaps trading shows there is only a 10 percent chance of a quarter-point increase on Sept. 16.
“With the Reserve Bank facing a highly uncertain global environment and mixed signals on the domestic economy, bringing the pause forward to September is a low-risk option,” Westpac Banking Corp. economists in Wellington said in a Sept. 6 report.
Westpac forecasts the rate will be unchanged until December. Previously, it expected a quarter-point increase this month.
Bollard on July 29 raised the official cash rate to 3 percent, saying the economic outlook had “softened” and the pace of further rate increases may be more moderate.
In June, the central bank forecast 1.1 percent growth in the second quarter. It releases revised estimates next week.
Economists are waiting for figures on export volumes tomorrow before finalizing their forecasts for GDP, which will be published on Sept. 23. The economy expanded 0.6 percent in the first quarter.
House Prices
House prices rose 3.1 percent in August from a year earlier, the slowest annual pace since December, according to an index compiled by Quotable Value New Zealand Ltd.
“Market sentiment remains cautious with little sign of urgency among buyers,” Glenda Whitehead, valuation manager at Quotable Value in Auckland, said in an e-mailed statement today. “There is still a considerable backlog of unsold property on the market. Prices continue to slide backwards in most areas.”
Manufacturing sales excluding inflation were led lower by seafood, fruit and vegetables, today’s report showed. Meat, dairy, textiles, beverages and fabricated metal also fell.
Ten of 15 industries recorded declines. Meat and dairy volumes, which make up a quarter of all manufacturing, dropped 1.3 percent.
Including price changes, manufacturing sales jumped 3.1 percent, led by a 14 percent surge in the dairy and meat processing industry, as overseas milk powder and cheese prices increased. Excluding meat and dairy, sales fell.
A second report today showed construction increased for a third quarter, supporting economic growth.
Residential building excluding inflation increased 10.8 percent in the three months through June from the first quarter, when it gained a revised 2.6 percent, the statistics agency said.
Non-residential construction rose 5.2 percent and total construction jumped 8.2 percent, the report showed.
To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
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