Humming along

New Zealand’s powerful economic upswing appears to have rumbled on through the first quarter of 2014 – although there are some question marks in the detail. Last week the NZIER’s Quarterly Survey of Business Opinion gave a rough indication of the state of economic activity in the March quarter, well in advance of Statistics New Zealand’s official figures. Judging by the results of the survey, the economy is still humming along.

When asked about their own activity levels, a net 23% of firms reported better times over the last three months and a net 35% expected further improvement over the next quarter – both responses were more upbeat than last quarter. When questioned about the overall economy, a net 52% of firms expected business conditions in general to improve over the next six months, unchanged from a 20-year high reached for this question in the December survey.

This leaves us quite comfortable with our forecast of 1.1% GDP growth in the March quarter.

While the status of the overall economy is very clear, there are question marks around the housing market and consumer spending. Housing market turnover and house price inflation dropped sharply in the wake of the Reserve Bank’s restrictions on mortgage lending, which were introduced in October last year. We have been looking for a shortterm bounce in the market, as the initial shock of the mortgage restrictions wears off.