1 Feb 2011

Building figures point to recession - economist

7:02 am on 1 February 2011

A slump in building consents in December is being seen as a sign the economy may have drifted back into recession.

Statistics New Zealand figures show 994 consents were issued, the lowest for any month since records began in 1965.

The Master Builders Federation says cost increases including GST, higher interest rates, emissions trading costs and the rising cost of materials including steel and concrete have contributed to the construction industry's problems.

Chief executive Warwick Quinn says it is becoming less affordable to build homes, so people are reluctant to spend.

Deutsche Bank chief economist Darren Gibbs says December also saw poor retail sales, and the economy probably shrank in the December quarter.

But the chief economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub, says he believes a return to recession is unlikely.

The Treasury also believes a recession will be avoided.

In its latest monthly summary of economic indicators, Treasury says gross domestic product is expected to rise in the December quarter, but it could be by less than previously forecast.

It says the economy is weaker than it expected in the middle of last year, but the prospects for this year are more upbeat, because of earthquake reconstruction work, the Rugby World Cup and high commodity prices.