The verdict is in

There was a notably widespread downturn across the range of activity indicators for the New Zealand economy in April, which we suggested at the time could be a temporary blip caused by the close timing of the Easter and Anzac Day holidays this year. With an extra month of data now available, the evidence for that theory is supportive, but not decisive. While there was some holiday effect in April, it also seems plausible that there’s been a genuine slowing in the economy’s momentum over the last few months.

In keeping with that view, last week’s data was a mixed bag. On the positive side, residential building consents (excluding the volatile apartment units category, which had spiked in April), rose 4.6% in May. However, that wasn’t quite enough to reverse the 5.2% drop in consents in April, and consents were surprisingly flat in the Canterbury region.

Also on the plus side, the credit aggregates showed an uptick in lending growth in May, both for business lending (which had flattened out over the previous few months) and for housing. The latter was consistent with previously published figures on high loan-tovalue ratio (LVR) mortgage lending, which rose for a second time in May – though at a 5.3% share of the total, it remains well within the Reserve Bank’s ‘speed limit’ of 10%.

But there were also some substantial negatives added to the mix last week. Firstly, business confidence fell for a fourth straight month in June, after having reached a 20-year high in February this year. While the level of confidence remains high – around where it was in September last year – it provides more evidence of a slowing in the pace of the upturn since the early part of this year.