Editorial: Time for a cup of tea

00:42, Sep 13 2012

 The most understandable aspect - maybe even the only understandable aspect - of a range of economic data released in the last few days has been that New Zealanders are being careful with their plastic cards.

Understandable because trying to measure that often conflicting data is becoming more like reading tea leaves than analysing solid financial indicators.

Consumers are still spending, and that spending increased by 3 per cent in August over the previous month, according to figures released by ANZ, but that was driven largely by the horrific rise in petrol prices that hit a record $2.23 a litre during the month.

When fuel and other related vehicle costs are removed, total retail card spending rose only 1 per cent. So we are still spending, but cautiously, and largely on necessities. Noticeably down again in the August figures are what are described as big-ticket items - whiteware, furniture and the like - and when those items are being purchased it is most likely to be at sales where consumers are hunting for bargains.

That's not likely to change any time soon. There are lots of positive data but just as many negatives and trying to plot a course through that hodgepodge needs a rocket scientist's brain and an unerring belief in the tooth fairy.

As BNZ chief economist Tony Alexander explained in his column yesterday, statistics can be made to show almost anything an economist or financial analyst wants them to show.


He cited as an example the official March quarter gross domestic product figures rose 1.1 per cent. The problem with that comparatively rosy picture is that GDP measures total manufacturing without taking into account how much of that is still sitting in warehouses and on the factory floor, unsold. Strip that out and growth becomes shrinkage and GDP was actually down 0.5 per cent in the quarter.

So at best, we were standing still.

There are real positives for the New Zealand economy and particularly for the southern region where GDP relies so heavily on primary produce - dairy, sheep and beef farming. Fonterra's internet auction prices for milk powder have begun rising again, driven to some extent by serious northern hemisphere droughts in the United States, China and in Russia where wheat production is down 30 per cent.

Those drought conditions are predicted to continue for some time, offering some expectation that the dairy industry is on the rise again.

There is growing confidence, also, that the European debt crisis is if not overcome at least now being held in check.

However, many of the European economies are still close to basket cases and some analysts are warning that China's strong economic growth is threatened by the same GDP sleight-of-hand that turned New Zealand's March quarter figures from shrinkage to growth - billions of dollars of goods manufactured for sale in Europe and the United States are sitting gathering dust in Chinese warehouses because no-one is buying them.

Those same analysts had begun predicting slow but steady growth in the United States economy in the next 12 months, good for New Zealand because it would strengthen the US dollar and help our exporters by lowering the exchange rate from the 80c+ where it currently stands, but the latest poor job growth statistics in America have effectively ended that hope.

New Zealand consumers are right to be cautious.

The Southland Times