Unemployment expected to fall to 3.5 per cent

There are signs the deep business gloom about the economy is lifting slightly, despite the labour shortage, and unemployment could fall back to a low of just 3.5 per cent.

The Household Labour Force Survey is out tomorrow, with Westpac picking a modest rise in job numbers and lower unemployment down to 3.5 per cent from 3.9 per cent.

The jobless figures were expected to improve because fewer migrants were coming to New Zealand. Part-time jobs may have been given a boost by the recent Lions rugby tour, according to other economists.

The unemployment rate could fall because a sharp slowdown in new arrivals in the past three months could affect the size of the available labour force, Westpac said.

In June, 300 more people left New Zealand than arrived here, according to Statistics New Zealand figures, with a net outflow of about 2000 in three months.

However, ANZ Bank expected the unemployment rate to remain unchanged at 3.9 per cent, with subdued economic growth in the past six months curtailing job growth.

Job numbers were expected to rise just 0.2 per cent in the quarter, ANZ said.

The figures could be stronger if there was a sharp rise in part-time jobs because of the recent Lions rugby tour, ANZ said.

Lions fans clocked up $34 million on their credit cards during their six-week stay, but the total spend-up could be up to $120 million in total, according to some credit card company estimates.

Meanwhile, a couple of bank surveys show business confidence on the rise, in part because of a falling Kiwi dollar.

A Bank of New Zealand confidence survey shows a net 45 per cent of businesses survey last week were expecting worse times in the next 12 months.

But that was better than the net 51 per cent who were gloomy last month and was the best result since early March.

The survey showed a continued shortage of labour, pressures on profit margins, uncertainty about the election next month and the still high exchange rate, BNZ said.

Manufacturing was difficult, and while construction was strong there were signs of that slowing down in future, the BNZ survey said.

"Residential building is slowing, but there is still plenty of work. Commercial is very busy and shows no signs of peaking yet," one building company said in the survey.

The BNZ survey included about 300 respondents.

The National Bank's July confidence survey also showed an improvement in confidence, which Treasury papers suggested was a result of the small fall in the New Zealand dollar last month.

The impact of a high New Zealand dollar and rising costs saw business confidence fall in the earlier New Zealand Institute of Economic Research (NZIER) June Quarterly Survey of Business Opinion, which covers a much wider range of businesses.

Monthly Treasury documents out today said though domestic demand remained strong, there "are signs of it slowing".

Retail sales were weak in May, with nominal sales down 0.6 per cent, partly due to the timing of Easter.

Residential house building consents were up 12 per cent in June but were down almost 40 per cent on the peak in the middle of last year.

- nzpa