9 Nov 2010

Economy not out of the doldrums yet

3:45 pm on 9 November 2010

There are further signs the pace of economic recovery in New Zealand is picking up after a flat patch in the middle of the year, but the housing market remains subdued.

Retail spending and job ads rose in October, while the rate of growth in house values slipped for the sixth month in a row, Radio New Zealand's business editor Patrick O'Meara reports.

Household spending has been tepid, as people concentrate on reducing debt and saving more.

But Paymark, which processes 75% of all credit, debit card and other electronic transactions, says spending rose 3.3% in October - double the growth rate experienced mid-year.

While that is partly driven by higher GST-induced prices, Paymark's Simon Tong says volumes jumped nearly 5%, indicating income tax cuts did boost spending.

However, he says it is too early to say retailers are over the worst.

Online job advertising site Seek says the number of new jobs listed rose 7% in October - the highest increase since January.

It follows signs that wages are rising and firms are hiring more part-time workers.

Led by demand for trades and services in earthquake-hit Canterbury, Seek's senior executive Helen Souness says the strength is broad-based and indicates firms are feeling more upbeat.

Housing market subdued

In contrast, the housing market remains weak.

Quotable Value says the traditional spring surge did not happen and the rate of growth in property value slipped by 1.1% in the October year.

The market is now 5.5% below its peak in late 2007.

QV research director Jonno Ingerson says houses are not shifting in what is traditionally a strong time for the real estate market and expects it to be flat for the rest of the year.

Other commentators are hesitant to say the latest retail and labour market figures herald a stronger and durable recovery just yet.