Good news expected in data

The sale of the Government housing stock will play a role in returning the Crown accounts to...
The sale of the Government housing stock will play a role in returning the Crown accounts to surplus. Photo by Gerard O'Brien.
The short week will be highlighted by two important financial announcements tomorrow which, although not market moving, will underline a couple of positive trends in the economy.

The first is the Crown financial accounts for the eight months to February and, later in the day, the second is Statistics New Zealand's accommodation survey.

BNZ economist Doug Steel said the recent trends in the Crown accounts had been encouraging. The fiscal accounts had been ''sneaking ahead'' of Treasury forecasts lately and figures for the seven months to January revealed the first part year surplus since 2009.

''The February figures will hopefully keep exhibiting a pick up in tax revenue growth, indicative of a buoyant economy, such that the chances of a core surplus for the full year to June 2015 remain alive.''

The February accounts were the penultimate release before Budget 2015 on May 21.

Finance Minister Bill English will be watching the accounts closely, particularly as his recent plans to sell off state houses to social agencies took a beating when the Salvation Army declined to participate.

Mr English is thought to be looking for a lump sum from the sale of the run down state housing portfolio rather than selling the houses individually to occupants of those seeking first homes.

A successful sale of the state houses could help lift the Crown accounts into surplus just in time for the end of the June financial year.

The accommodation survey results would be heavily affected by holiday timing but the trends were worth noting, Mr Steel said.

In the 12 months to January, guest nights at commercial accommodation providers were 5.5% higher than in the same period a year earlier. It built on similar growth in the year before.

The accommodation survey was illustrative of a couple of wider themes in the economy, he said.

Strong activity growth was slowly but surely putting pressure on existing capacity. Hotel occupancy, as an example, averaged 62% in the year to January, well above the long term average of 55%.

''The hotel story is part of a more general lift in occupancy rates across the accommodation sector. No wonder accommodation building consents have increased strongly over the past year.''

Higher occupancy rates also suggested upward pressure on prices in coming quarters _ not that accommodation prices were ever going to drive big changes in the Consumers Price Index, the official measure of inflation. The sector accounted for only 0.5% of the index.

The accommodation survey also reflected a wider story of strength in the tourism sector over the past year or so, Mr Steel said.

It was important from a macroeconomic perspective, given the tourism sector was the nation's second largest foreign exchange earner and would provide some offset to the current weakness of dairy.

China had been a key source of tourism strength. Chinese tourist numbers in the year to February were up 21% on a year earlier.

The strong growth was in direct contrast to the value of New Zealand goods exports to China retreating from its previous peak, he said.

 

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