Positive signs for construction activity

Tuesday, 24 December 2013, 9:21 am
Press Release: ASB Bank

Positive signs for construction activityPositive signs for construction activity

• The ASB Cantometer rose to 1.2 in December, after holding steady for the four preceding months.
• The value of construction work rose by around 20% in Q3.
• House sales fell in November, possibly impacted by the RBNZ’s mortgage restrictions.

There are positive signs for construction activity in Christchurch with the Cantometer snapshot rising to 1.2 in December, with zero marking the level of activity prior to the earthquakes.
“The Cantometer index held steady at 1.0 for four months straight, but has now started to rise again,” says ASB Chief Economist Nick Tuffley. “This upwards growth is driven by a further acceleration in construction activity in the region.”
“Data for the third quarter showed that the value of both residential and non-residential building work rose by around 20% from the previous quarter. Building consent issuance has also risen strongly in both October and November.”
Mr Tuffley suggests that construction activity is accelerating once again. “Construction activity has advanced in fits and starts, but it seems to be growing rapidly again now. The volume of work to be done over the next decade or so is monumental, so we expect continued growth in activity,” says Mr Tuffley.
The other major recent development has been the introduction on 1 October of the RBNZ’s restrictions on high-LVR mortgage lending. “There was a drop in the number of houses being sold over November, both in Canterbury and at the national level. But supply constraints are likely to maintain upwards pressure on prices in Canterbury for a while yet.”
Outlook
Recent data on construction activity provide encouragement that rebuilding activity is accelerating rapidly. “While the rebuild looks like it could be more protracted than originally envisioned, it is definitely beginning to gather steam,” concludes Mr Tuffley. “With $40 billion worth of work to get through, activity will continue to ramp up over the next few years.”

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.

ENDS

© Scoop Media

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