New Zealand Building Approvals Fall to 22-Year Low

By Tracy Withers

July 29 (Bloomberg) -- New Zealand home-building approvals slumped to the lowest in almost 22 years in June, adding to signs rising credit costs and falling consumer confidence have pushed the economy into recession.

Approvals fell 20 percent from May to 1,337, the lowest since October 1986, Statistics New Zealand said in Wellington Today, citing seasonally adjusted figures. Excluding apartments, approvals dropped 13 percent from May.

Fewer building approvals suggest residential construction is contracting, subtracting from economic growth. The $104 billion economy shrank in the first quarter and eight of 13 economists surveyed by Bloomberg News expect gross domestic product also declined in the three months ended June 30, putting the nation in its first recession since 1998.

``The background of a glut of homes listed for sale, weakening prices, high financing costs and muted migration are behind a contraction in residential construction,'' said Jane Turner, economist at ASB Bank Ltd. in Auckland.

The decline is in line with the central bank's expectations and is ``unlikely to convince the bank of a more aggressive easing cycle,'' Turner said.

Reserve Bank of New Zealand Governor Alan Bollard last week cut the benchmark interest rate from a record-high 8.25 percent, the first reduction in five years. All 15 economists surveyed by Bloomberg expect another quarter-point cut at the next review on Sept. 11.

House sales fell 42 percent in June from a year earlier and the days to sell a property rose to a six-year high, according to the Real Estate Institute. Consumer confidence slumped to an all-time low in the second half of June, according to a Roy Morgan poll.

Approvals in the year ended June fell 12 percent from a year earlier, the statistics agency said, citing unadjusted figures. Second-quarter approvals dropped 19 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.