June 2013 Monthly Economic Indicatiors

The June Monthly Economic Indicators (MEI) was published on the Treasury Website today at 2.00pm. The report provides a summary of recent economic events.

• Drought slowed growth in the March quarter and will further restrain it in the June quarter

• The current account deficit is expected to remain below 5% throughout 2013

• Nervousness in financial markets as they adjust to US monetary policy signals

Read more at: http://www.treasury.govt.nz/economy/mei/jun13

Executive Summary

• Drought slowed growth in the March quarter and will further restrain it in the June quarter

• The current account deficit is expected to remain below 5% throughout 2013

• Nervousness in financial markets as they adjust to US monetary policy signals

The surge in growth recorded in December was reduced in March as the most severe drought in at least 70 years sharply curtailed agricultural production. The drought will further constrain growth in the June quarter and its negative effects may also affect the September quarter. Although the quarterly growth rate will remain moderate in the June quarter, other indicators of growth released over the month, including business and consumer confidence, showed domestic demand continued to strengthen. These developments are likely to see growth accelerate as the drought impacts fade over the second half of the year.

The annual current account deficit narrowed to 4.8% of GDP in the March quarter, mainly owing to a larger goods surplus. The outlook is for the deficit to remain around its current level over 2013. However, the deficit is expected to widen thereafter as the ongoing economic recovery and the Canterbury rebuild generate increased demand for imported investment goods and higher profit outflows from foreign-owned firms operating in New Zealand.

June was characterised by general nervousness in global financial markets owing to less accommodative signals from the Federal Reserve (Fed), and despite positive economic data. The economic recovery is becoming more evident in the developed world, although emerging economies are experiencing slower growth. The fall in asset prices does not suggest any deterioration in economic conditions, but reflects the market adjusting to the new Fed policy stance.

The first of the Special Topics in this release looks at the relationship between employment and GDP in New Zealand and evaluates its recent behaviour. The second Special Topic outlines current fiscal policy and its impact on the economy.

ENDS

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