Cameron Bagrie. Photo by Craig Baxter.
Economic activity surged in the three months ended
December but the employment outlook suggested caution should
remain, ANZ chief economist Cameron Bagrie said yesterday.
The latest New Zealand Institute of Economic Research (NZIER)
Quarterly Survey of Business Opinion showed that economic
activity reached levels not seen since mid-2007. Businesses
were more optimistic, up 19% in December from -1% in
September. With trading activity up 8% in December from -4%
in September, annual GDP growth for 2012 was likely to be
Mr Bagrie said two caveats were noteworthy.
''We've been here before with various sentiment surveys and
noted a failure of the economy to kick on. For business
sentiment to match reality we need to see a lift in consumer
Labour market readings also remained somewhat guarded, he
said. Employment did tend to lag but it was still a key
prerequisite to a broadening in the economic recovery. Job
advertisements, a timely leading gauge of employment,
continued to flat-line.
NZIER principal Shamubeel Eaqub said new hiring remained
subdued and labour was getting a little easier to find
''This is surprising, as a recovery in activity tends to be
accompanied by more jobs and increasing competition for
labour that raises wages. This part of the recovery remains
It might be explained by reduced working hours during the
recession which were now returning to more normal levels,
rather than through increased hiring, Mr Eaqub said.
Capacity pressures were intense in Canterbury but there was
little pressure in the rest of the country. Firms did not
intend raising prices much and consumer price inflation would
Margins remained under pressure but profits were starting to
lift on the back of better sales, he said.
Mr Cameron said the survey continued to illustrate regional
differences with a large chunk of the recovery attributable
to more positive readings from Auckland and, to a lesser
The lift in Auckland appeared to be related to the resurgent
housing market. Low interest rates were working their
''magic'' in the financial services sector. They were also
propping up the longer-term construction sector outlook.
''Fiscal belt-tightening is contributing to a shorter
pipeline for government sector work. While this suggests a
strong recovery is in prospect, we believe structural
considerations and the limited margin of construction sector
capacity will temper this somewhat,'' he said.