Construction and Labour Inflows Boost Canterbury Activity

Tuesday, 28 May 2013, 9:39 am
Press Release: ASB Bank

Media release
ASB Cantometer Index

EMBARGOED UNTIL 5AM TUESDAY 28 May 2013

Construction and Labour Inflows Boost Canterbury Activity

• The ASB Cantometer lifted again in May, boosted by broad-based increases in activity.
• Construction demand continues to drive the index with residential consents and concrete usage now above previous peak levels.
• Solid demand for additional labour continues to support population inflows.

The ASB Cantometer snapshot index edged higher again in May, lifting to 0.7 from 0.6.

ASB Chief Economist Nick Tuffley says, “The increase in the index was relatively broad-based across activity indicators suggesting that construction activity is now leading to increased demand in the wider Canterbury economy.”

The construction index continued to lift in May, underpinned by a further increase in residential consent issuance and concrete usage. Mr Tuffley says, “Consent issuance and concrete usage have now lifted above the previous peak recorded during 2007, highlighting that that the rebuild is starting to gather pace.”

Electricity data for the March quarter also pointed to a strong increase in energy demand in the region, indicating further activity growth.

Permanent and long-term net migration also continues to lift as increasing employment demand attracts labour into the city. Mr Tuffley says, “Permanent and long-term arrivals into Canterbury have steadily increased and are now up 77% from year-ago levels.”

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Mr Tuffley adds the increase in labour demand is finally showing up in employment figures. “The number of full-time-equivalent employees has increased steadily over the March quarter and figures are now sitting above pre-earthquake levels,” says Mr Tuffley.

Outlook

“Over the coming year, the RBNZ will balance the Canterbury construction-led lift in activity and intensifying housing market pressures against the impact of the elevated NZD. At the March MPS the RBNZ expressed concern around the prospect for stronger construction inflation, although so far, price increases have remained contained to Canterbury. We continue to expect the RBNZ will leave the OCR unchanged until 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.

The ASB Cantometer:

http://img.scoop.co.nz/media/pdfs/1305/Embargoed_ASB_Cantometer_280513.pdf

ENDS

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