Monday 8th September 2008
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The volume of residential building work put in place in the June quarter was the lowest since the final quarter of 2002, Statistics New Zealand said. The value of residential construction dropped to NZ$1.25 billion, seasonally adjusted.
Non-residential construction fell 3.6% in the latest quarter.
"We are yet to see the ravages of the housing bust in real activity indicators," said Shamubeel Eaqub, economist at Goldman Sachs JBWere. "This data adds downside risk to our 2Q GDP forecast."
Goldman Sachs had been forecasting the economy shrank 0.3% in the second quarter though the construction figures could imply a contraction of as much as 0.9%, Eaqub said.
Demand for residential properties has tumbled in the past few months, based on government figures, reflecting weaker consumer confidence in an economy that's probably fallen into recession. Home building consents held near a 22-year low in June and July, according to Statistics New Zealand.
The average property price fell 4.5% in August, adding to a 2.2% drop in July, according to Quotable Value, the government valuation agency.
To be sure, the central bank is expected to cut its official cash rate a quarter point to 7.75% this week, adding to its reduction in July and potentially heralding more rate cuts.
The reduction may help encourage banks to lower home mortgage borrowing rates.
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