July 10 (Bloomberg) -- New Zealand house prices rose for a second month to a record in June while spending on debit, credit and store cards gained for a fourth month, adding to signs of a recovery in domestic demand.
Prices gained 0.3 percent from May, when they increased 1.7 percent, according to an index published by the Real Estate Institute of New Zealand today. The value of transactions on electronic cards rose 0.4 percent from May, when it increased a revised 1 percent, Statistics New Zealand said in Wellington.
Rising house prices and consumer spending last month indicate modest economic growth at the end of the second quarter after gross domestic product jumped 1.1 percent in the three months through March. Reserve Bank of New Zealand Governor Alan Bollard last month left the official cash rate unchanged at a record-low 2.5 percent and signaled interest rates may not change until next year, citing tame inflation and a weakened global outlook.
“The recovery in retail spending is likely to remain gradual,” Christina Leung, economist at ASB Bank Ltd. in Auckland, said in an e-mailed note. “We continue to expect the RBNZ will hold off raising the cash rate until at least March.”
New Zealand’s dollar was little changed after the card spending report, buying 79.58 U.S. cents at 12:29 p.m. in Wellington. The chance of a rate cut this year fell to 51 percent from 61 percent late yesterday, according to interest rate swaps data compiled by Bloomberg.
All 16 economists surveyed last month by Bloomberg News expect the central bank’s next move on borrowing costs will be an increase, with two forecasting a rise in December and 14 predicting no change until 2013.
Domestic demand isn’t forecast to accelerate rapidly amid concern that weak global growth will curb exports, which make up 30 percent of the nation’s economy. Businesses turned pessimistic for the first time in five quarters after companies had another three months of weak trading, according to the New Zealand Institute of Economic Research Inc.’s second-quarter survey today.
A net 4 percent of 925 companies forecast the economy will deteriorate over the next six months, compared with 13 percent seeing improvement in the first-quarter survey, the institute said. A net 13 percent said profits fell in the April-June period and a net 4 percent fired workers.
“The recovery remains lackluster,” Shamubeel Eaqub, principal economist at the NZIER, told reporters in Wellington today. The survey results are “consistent with consensus forecasts of subdued economic growth, inflation and thus low interest rates,” he said.
The house price recovery is a sign of increased property demand, led by buyers in Auckland, home to a third of the nation’s 4.4 million people, as new listings decline.
“The constraint across the country appears to be shortage of properties to meet buyer demand,” REINZ Chief Executive Helen O’Sullivan said in an e-mailed statement. “This is most acute in Auckland.”
House prices rose 1.7 percent in the past three months and were 5.3 percent higher than a year earlier, today’s report showed. The number of sales rose 17 percent from a year earlier, the institute said. The time needed to sell a house dropped to 37 days from 38 days in May and 44 days in June last year.
In June, card spending on hospitality increased 3.1 percent, today’s government report showed. Sales of consumables such as food, which make up 35 percent of retail purchases, rose 1 percent. Spending on fuel fell 4 percent as prices declined.
Excluding sales at fuel outlets, car dealers and parts stores, transactions rose 0.9 percent.
Spending on services and purchases of non-retail items such as travel and medical fees also gained. Purchases on retail, non-retail and services items combined rose 0.3 percent, the statistics agency said.
To contact the reporter on this story: Tracy Withers in Wellington at email@example.com
To contact the editor responsible for this story: Stephanie Phang at firstname.lastname@example.org