Signs of an improving economy: applications for credit up

17 June 2011, Auckland. Latest data from leading credit bureau Veda Advantage provides evidence of a quietly improving economy with applications for unsecured credit starting to lift.

Managing Director John Roberts says there is anecdotal evidence the economy is slowly starting to pick up but bureau statistics for the first five months of the year put the numbers behind the anecdotes.

“The data shows the pick-up is slow and cautious. This is a good thing as we build a strong and solid recovery that consumers and businesses can feel confident about,” Mr Roberts says.

“And we have to be aware that we are building off the economic low hit in 2008 and 2009. While the economy is showing signs of improvement it still has a long way to go to match the peaks of consumer confidence in 2006.”

For the five months to May 2011 credit card inquiries were up 12.63 percent, hire purchase inquiries up 6.68 percent and consumer credit inquiries up 1.24 percent This is when compared with the same five months last year.

When May 2011 is compared with May 2010 the lift in inquiries is marked with credit inquiries up 20.55 percent and consumer credit inquiries up 8.23 percent.

Applications for credit provide a valuable insight into economic activity with credit application data four to six weeks ahead of actual drawn-down credit. It is a weather vane of economic activity.

Mr Roberts says the same data shows a pick-up in applications for mortgages while at the same time is a barometer on the Canterbury economy post-earthquake.

Mortgage applications for the first months of 2011 were up 5.53 percent on the previous five months while applications in May 2011 were 19.92 percent up on May 2010.

“The housing market has had a rough ride but we are now getting signals that it is improving with New Zealanders feeling more comfortable again about borrowing to buy a home,” Mr Roberts says.

Veda Advantage’s data shows how Christchurch’s 22 February earthquake stopped the city’s economy in its tracks with the greatest fall in credit applications since the Global Financial Crisis unfolded.

In the following month of March, as thousands of people in Christchurch worked to pick up their lives, credit applications were down a massive 29 percent – the greatest monthly fall in applications since before the Global Financial Crisis. For the same month applications increased across the country by 2.7 percent compared with March last year.

The statistics already show signs of Christchurch’s economy on the mend with applications for credit in May still down on May last year but climbing back from the near 30 percent fall in applications experienced in March compared with March 2010. May applications were down -3.17 percent but the statistical trend shows the region’s appetite for credit lifting, in line with the rest of the country.

That upward trend was again hit following Monday’s severe aftershocks.

Mr Roberts says “the statistics are cold hard evidence of the earthquake’s economic impact on Christchurch residents and businesses.”

He says it is good to see the numbers starting to turn-around but is concerned about the impact of ongoing aftershocks on the wellbeing of the region’s people and their day-to-day lives.

But Mr Roberts says “these statistics also tell us that businesses up and down the country are feeling the effects of the Christchurch-economic-shutdown post the February earthquake. While it put some Christchurch companies out of business, there are others in cities around New Zealand which lost significant business on 22 February.”

Christchurch amounts to 15 percent of New Zealand’s economy.

ENDS

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