ASB Cantometer Index Canterbury recovery steady in September

Thursday, 26 September 2013, 9:37 am
Press Release: ASB Bank

Media release

ASB Cantometer Index

EMBARGOED UNTIL 5AM THURSDAY 26 SEPTEMBER 2013

Canterbury recovery steady in September but pipeline construction activity still rising

• The ASB Cantometer remains steady in September at 1.
• The lumpy nature of commercial projects sees construction activity dip but consent issuance indicates a bounce-back over the second half of 2013.
• Housing stock under strain.

ASB’s Cantometer Index remained broadly unchanged over September, with the snapshot index steady at 1.

Construction activity dipped in the June quarter, reflecting a fall in non-residential consent issuance earlier in the year. ASB Chief Economist Nick Tuffley says, “The lumpy nature of non-residential construction projects can cause some volatility in data.”

Encouragingly, both residential and non-residential consents have picked up further and this indicates a continued lift in the pipeline flow of rebuild activity. Mr Tuffley says, “Non-residential consent issuance has since lifted strongly and indicates a rebound in construction work over the second half of 2013.”

The Canterbury rebuild continues to attract population inflows into the region, with Canterbury net migration lifting further over recent months.

“The rebuild is providing increased job opportunities while at the same time, Australia’s labour market has softened with the unemployment rate edging higher. Over recent months we have seen a surge in the number of New Zealanders returning from Australia.”

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However Mr Tuffley warns, “The lift in population growth continues to place strain on housing stock. Rents are lifting strongly in Canterbury, up 12% on year-ago levels.”
The lift in population adds to existing pressures, with the upshot being the housing market is very tight in Canterbury.

“The housing market is still suffering from supply constraints, with new listings remaining very low. The number of house sales has edged higher over the past year, in line with national trends, but the level in turnover remains muted.”

Outlook

The New Zealand and Canterbury economic recovery is starting to broaden beyond construction. Mr Tuffley says, “Consumer confidence has steadily improved and the upcoming dairy season is looking promising for rural incomes.”

“While current inflation pressures are subdued, it is widely expected inflation will quickly lift over the coming year as the economic recovery strengthens. 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.

Embargoed_ASB_Cantometer_26_September_2013.pdf

ENDS

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