That means not just looking at the last three pieces of news to appear and if they are all bad concluding that means the economy is in for a bad time.  That comment is particularly relevant at the moment because most of the stuff we are being asked to comment on currently falls into the negative category.  Petrol prices have been rising strongly and are more than 60% above their levels four years ago. Food prices have also been increasing firmly and have risen over 5% in the past year with grocery food items up by over 8%.

On the basis of these sort of increases we have been warning about household budgets being constrained and retail spending easing off particularly in light of sharp increases in mortgage interest rates.

But sometimes things need to be put into perspective.  For instance, compared with where we were four years ago consumer prices on average have risen only 13% with a 13% increase in food prices as well.  Over the same period of time average wage rates have increased about 22%.  Over 200,000 more people have found employment with the unemployment rate dropping from 4.1% to 3.4%.

So it is not true to say that people by and large are worse off than they were four years ago although some will be.  These are likely to be the people who have taken on a lot of debt in recent years, kept topping up their mortgage to buy new cars and fancy household appliances as house prices rose, and now face their fixed interest rate jumping as much as 3%.  These people will most definitely have some cash flow problems and these are the ones the newspapers tend to focus on.

But only 30% of households in New Zealand actually have a mortgage.  Some 30% of households are in rented properties and the rest own the house they  live in with no mortgage.  So by and large 70% of households do not suffer from rising interest rates.

Nevertheless, economics is about what happens at the margin and at the margin times have toughened up.  On that basis we have to sound very cautious about retail sales growth over the coming year with many stores likely to see revenue falling. In addition we are highly likely to see the unemployment rate go up as companies lay off people and not everybody gets hired again straight away.

For those in the rural sector times will be bad if you are a sheep and beef farmer in a drought area.  But for most others things will look okay unless you are looking to sell some lifestyle units in the near future.  Speaking as the owner of the 10 acre block north of Wellington, it is clear that the market has slowed considerably with some properties nearby remaining unsold after a year.

Lifestyle blocks have become relatively expensive compared with average household incomes in New Zealand and while I am sure many people consider them highly desirable they may be thinking twice about the extra petrol cost involved in living remotely from schools, shops, and work.

This means if you are looking to put a lifestyle property on the market in the near future you may not get the price you want and in that regard you’ll be in exactly the same boat is people in the city’s trying to sell their houses, retailers try to sell as many goods as they did last year, builders wanting to build as many houses as they did last year, and so on.  Such is the nature of a slowdown.