Activity in Chchremains strong but growth may be stalling

Wednesday, 30 October 2013, 10:05 am
Press Release: ASB

Media release

ASB Cantometer Index

EMBARGOED UNTIL 5AM WEDNESDAY 30 OCTOBER 2013

Activity in Canterbury remains strong but growth may be stalling

• The ASB Cantometer remained steady at 1 in October for the third consecutive month.
• While activity continues to hold up at a very high level, indications are the pace of growth may be starting to slow.
• Flat patch may be temporary, or a sign bottlenecks in the rebuild process may be starting to emerge.

The Cantometer snapshot remained steady again in October, sitting at 1 (zero marks the level of activity prior to the earthquakes). ASB Chief Economist Nick Tuffley says, “After experiencing rapid improvement since late last year, the Cantometer index has remained flat over the past three months. Indicators suggest activity continues at a high level, but the pace of growth appears to have eased. This may indicate bottle necks are starting to emerge in the Canterbury rebuild process.”

Growth in building consents appears to have stalled after lifting strongly over the past year. Mr Tuffley says, “The recent trend in building consents suggests construction activity will soon start to level off, although at high levels.” 

Mr Tuffley adds, “The recent results raise the question - are the flat results due to a temporary lull in activity before the upward trend resumes, or a larger issue where bottle necks may be starting to impact?”

Further housing construction is required to alleviate housing shortages in Canterbury. “Housing data continues to indicate the housing market is supply-constrained with low levels of new listings constraining the level of turnover. Adding to the squeeze, the net migration influx will continue to exacerbate current housing shortages,” says Mr Tuffley.

Canterbury consumer confidence was also somewhat soft over the September quarter, lacking the usual seasonal increase. “The result was surprising and suggests spending growth may remain flat heading into the second half of 2013.” Nonetheless, Mr Tuffley expects further growth in retail spending over the coming year, “Continued population growth and a lift in incomes will continue to underpin stronger retail demand.”

Outlook

Overall the outlook remains bright for Canterbury, with construction still continuing at very elevated levels. However, some recent data trends have suggested growth in activity may be slowing. Mr Tuffley says, “We assume further lifts in consent issuance from here, but if the upward trend does not resume soon a closer look at capacity constraints and reducing bottle necks in the region may be needed.”

“With further indications New Zealand growth is broadening beyond the Canterbury recovery, we continue to expect the RBNZ will start to lift the OCR from March 2014,” concludes Mr Tuffley.

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About the Cantometer

The Cantometer is designed to summarise activity in Canterbury. The study takes a range of publically available regional economic data, which are standardised and aggregated into a summary measure. The index has been rebased to zero in June 2010 (the end of the quarter immediately preceding the first earthquake) such that a positive number represents activity being above pre-earthquake levels.

Along with the aggregate Cantometer index, there are five sub categories: Construction, Housing, Employment, Consumer spending and Miscellaneous*.
These sub-indices will provide some insight into which sectors are driving the rebuild activity at a given point in time. 

For most activity the data reference the level of activity. However, when incorporating wages and house prices into the index we believe levels are less informative. Instead the index uses prices relative to the rest of the country.
An increase in relative prices is a signal for resources to be reallocated to the Canterbury region. 

The historical Cantometer series represented on the charts is a simple average of the complete set of data for each month. 

*The miscellaneous category includes electricity, car registrations, guest nights and permanent and long-term net migration. A common factor driving these areas will be population growth, and we expect all these indicators to increase as the rebuild gathers momentum. 

If you would like to receive ASB updates and reports by email: https://reports.asb.co.nz/register/index.html

ENDS

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