New Zealand’s Consumer Prices rose 0.3% in the first three months of the year to bring the 12 month inflation rate down to 3%, bringing it within the Reserve Bank’s target for the metric. Amid growing unemployment and slowing consumer demand, the price of goods increased by less than that of the previous year. Recessionary situations have shed jobs which in turn increases the supply of labor available, bringing their wages and overall spending down.
Now likely to be in its fifth straight quarter of contracting economic output, the New Zealand economy is struggling to revive the labor market. The rate of unemployment jumped from 4.2% in the final three months of 2008 to 4.6% in the first quarter of this year. New Zealanders wasted little time cutting back on expenses. Retail sales slowed significantly more than anticipated in January, by 1.1% vs 0.1%.
Economic threats from abroad continue to shake any foundational support that the country has. Yesterday, China reported that its annual gross domestic product grew by only 6.1%, the lowest of such levels in a decade and 0.7 percentage points slower than in the final quarter of 2008. In February alone, 26% of New Zealand’d exports were sent to China. A slowing Chinese economy would suggest a significant slowing in New Zealand’s shipments abroad and ultimately continuing weakness in its broader economy.
