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Strong NZ economy flowing through into demand for labour - ANZ

FXStreet (Bali) - Mark Smith and Sharon Zöllner, Senior Economists at ANZ, reviewed Wednesday's NZ jobs data, noting that strong economic activity is continuing to flow through into the demand for labour.

Key Quotes

"Strong economic activity is continuing to flow through into the demand for labour, with steady increases evident in both the HLFS and QES employment measures. That said, the growth slowed relative to Q1, and undershot market expectations."

"Despite stronger growth in the working age population, lower labour force participation (still the 3rd highest on record) pushed down the unemployment rate to 5.6% of the labour force, a five year low."

"Hours worked measures increased modestly, suggesting Q2 GDP growth of around 0.7% – still more than respectable in the context of a strong Q1. We expect the services sector to have outperformed, given the strong 1.8% sa lift in paid hours in that sector."

"Increases in the minimum wage helped deliver a stronger rise in LCI wages. Despite increasing capacity pressures in the labour market, the wage backdrop remains contained."

"The trajectory for productivity growth and supply-side capacity expansion across the economy is critical for keeping a lid on wage inflation, and thus the OCR. While productivity is difficult to measure, modest wage prints and strong labour force growth provide grounds for optimism."

"Further falls in the unemployment rate should see capacity pressures surface via upward pressure on wages and core inflation, and in isolation, is a factor that could potentially bring the RBNZ into play before the end of the year. However, the monetary policy outlook remains finely balanced given continued falls to dairy auction prices. We expect the RBNZ to remain on hold until March 2015 but to keep their options open."

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