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Total wholesale trade sales rose 1.9% (NZ$383 million) in the December 2009 quarter, the first increase since June 2008, due mostly to increased vehicle sales, petrol sales and building supplies, while sales of machinery fell the most, Statistics New Zealand said today. (Update 1 includes chart).

These figures suggest the economy is beginning to recover, but that activity is focused again on consumption and housing, rather than on business investment. The government and the Reserve Bank have expressed concern in the past that any recovery should be led by exporters and businesses, rather than by consumers.

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Core seasonally adjusted retail spending rose 0.6% in the December quarter 2009, Stats NZ said today. This was in line with a similar rise in the previous quarter and was driven by a rise in spending in bars and restaurants, while spending in supermarkets, hardware and furniture stores fell. (Update 1 includes ASB economist saying consumers are being cautious and the RBNZ can afford to leave the OCR at 2.5% until June)

Automotive fuel sales rose 5.7%, while the total value of total sales rose 1.0%. This is the third consecutive quarter of an increase in total sales values after one year of decline, business statistics manager Kathy Connolly said.

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New Zealand’s unemployment rate rose to a seasonally adjusted 7.3% in the December quarter from 6.5% in September, as more people entered the job market but could not find work, Statistics New Zealand said.

(Update 1 includes Stats NZ release, Update 2 includes labour force participation rate, Update 3 follows currency movement, Update 4 includes ASB economist reaction. Update 5 includes BNZ economist reaction.)

Economists said the result was worse than the Reserve Bank expected and meant the central bank would remain comfortable with its outlook of a steady Official Cash Rate (OCR) at 2.5% until mid-2010. Wholesale interest rates and the New Zealand fell slightly as financial markets nudged their expectations of the OCR down a bit.

Retail mortgage and deposit rates, however, are unlikely to fall as banks face higher funding costs and capital requirements in coming years. Bank net interest margins have fallen more than 20 basis points in the last year as they are forced to raise term deposit rates to encourage deposits from local savers and to pay higher rates for international wholesale funds.

Economist expectations had centred around the unemployment rate rising to 6.8% during the quarter. The New Zealand dollar initially fell from 70.8 USc to 70.1 USc on the news and had fallen to around 69.9 USc by 11:30am.

ASB economist Chris Tennent-Brown said the headline unemployment figure was higher than economist expectations because more people chose to enter the workforce than was expected at this stage of the economic recovery. Tennent-Brown said the figures would continue to make the Reserve Bank comfortable with its view that it can keep the Official Cash Rate on hold at 2.5% until the middle of 2010 (see full comments below).

BNZ economist Stephen Toplis said the figures showed some slack in the market that meant the Reserve Bank could be relaxed about its current monetary policy outlook. (See fuller comments)

Seasonally adjusted figures show an extra 16,000 people joined the labour force during the December quarter (up 0.7%), while the number of unemployed rose by 18,000 to 168,000 people. This was the highest number of unemployed people since the June 1993 quarter, Stats NZ said.

The 7.3% unemployment rate is the highest level since the June 1999 quarter and up from 4.7% in December 2008 and 3.5% in December 2007. The number of employed people fell by 2,000 to 2,152,000.

The labour force is made up of those in work (employed) and those not in work but searching for it (unemployed). The number of working age people out of the labour force altogether rose by 4,000 (0.3%) to 1,086,000. The labour force participation rate rose 0.1% to 68.1% of the total working age population in the December quarter from September.

Here is the release from Stats NZ:
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The labour market remained in its weak state in the December quarter, with wage figures released today likely to reinforce the Reserve Bank’s expectation that it can keep the Official Cash Rate (OCR) on hold at 2.5% until ‘around the middle’ of 2010, economists said. (Update 1 includes ANZ comment.)

Salary and wage rates, including overtime, rose 1.8% in the year to the December quarter, the lowest rate of growth since the year to June 2001, Statistics New Zealand said following the release of the December quarter Labour Cost Index (LCI) and Quarterly Employment Survey (QES).

A key figure watched by economists, private sector ordinary time wages, grew 0.3% in the December quarter from September, slightly below market expectations of 0.4% growth.

ASB economist Nick Tuffley said wage growth looked to be tracking within Reserve Bank expectations or a fraction below, meaning the central bank’s outlook for wage related inflation was likely to be little changed.

Unemployment figures for the December quarter are due out on Thursday, with economists picking the unemployment rate will rise to 6.8%  from 6.5% in September.

ANZ economist Khoon Goh said the figures confirmed ANZ’s view that employment growth figures on Thursday will be weak. ANZ economists are picking the Reserve Bank will hold off raising the OCR until June 2010, as opposed to ASB’s April expectation.

Here is the release below from Stats NZ:

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Overall spending with electronic cards rose a seasonally adjusted 0.3% in December from the previous month, following two flat months in October and November, figures released by Statistics New Zealand show.

The value of retail transactions using electronic cards rose a seasonally adjusted 0.7% in December from November. The rise in the value of retail transactions since July 2009 has been led by increases in spending on fuel, Stats NZ said. Not including fuel and vehicle related industries, core retail spending with cards rose 0.4% during December, up from 0.3% in November.

Actual figures show the value of core retail transactions using electronic cards was NZ$4.2 billion in December 2009, up 3.6% from December 2008. Overall spending with cards rose 4.9% from the year before, to NZ$5.9 billion.

The number of overall transactions with cards during December rose 6.6% from December 2008 to 106 million. Although this was up from 4.1% annual growth in December 2008, it was still down from an average growth of 8.3% between December 2005 and 2007.

The average transaction value in December for overall card spending was $55.82, the lowest for a December month since the series began in 2004. It was up from NZ$52.67 in November.

Here is the release from Stats NZ:

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The number of residential building consents issued for new houses continued to improve in November, with seasonally adjusted figures showing consents for new homes hit its highest level since May 2008, figures released by Statistics New Zealand show. (Update 1 adds economist comment.)

Taking away seasonal fluctuations, residential consents for houses rose 3.1% in November to its highest level since May 2008, after a 11.5% rise in October, Stats NZ said. The positive trend for non-apartment residential dwellings continued, but has dropped off slightly from 6.1% in August to 4.4% in November.

“Although the trend for new housing units has been increasing since March 2009, it is still considerably lower than the levels seen before mid-2007,” Stats NZ business statistics manager Louise Holmes-Oliver said.

Seasonally adjusted figures for house consents peaked at 2,087 in June 2007, before falling to a low of 911 in January 2009.

Unadjusted figures show there were 1,500 residential building consents issued in November, including 42 for apartment units. This was up from 1,168 in November 2008. Apartment figures often vary from month to month and have been held up recently by retirement village building.

ASB economist Chris Tennent-Brown said he expects overall building activity should pick up over 2010. “We expect housing construction will recover to a degree over 2010 and provide a solid boost to GDP growth,” he said.

Here is the release from Stats NZ:

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