ASB Cantometer Index: Construction surges, but housing slows

Friday, 30 May 2014, 9:29 am
Press Release: ASB Bank

30 May 2014

ASB Cantometer Index
Construction still surging, but housing market activity slows

• The ASB Cantometer fell slightly to 1.4 in May.
• Key construction indicators have eased a little.
• Employment growth was very strong in Q1, but wages fell.

The ASB Cantometer Index dipped slightly in May, down from 1.5 to 1.4 with building consent issuance easing marginally but remaining very strong.

“Labour market data from Q1 point to strong local employment growth over early 2014,” says ASB Chief Economist Nick Tuffley. “Employment grew by 3.1% over the quarter and by nearly 9% over the year to March, compared to annual employment growth of 3.7% nationally.”

“But average hourly earnings decreased slightly from the previous quarter, according to the Quarterly Employment Survey,” says Mr Tuffley. “This decline in Canterbury wages contrasted with a small increase in wages nationally which caused this component of the Cantometer to fall quite significantly.”

Mr Tuffley explains that this isn’t expected to last. “The fact that the Canterbury unemployment rate is so low suggests that labour market slack in the region is much lower than through the rest of the country. This will put upwards pressure on wages.”

Outlook
The continued improvement in the Cantometer Index reflects broadening economic activity, concludes Mr Tuffley.

“Despite the dip this month, The Cantometer Index is still only just below the record high set in April, showing that activity in the region remains strong. Solid employment growth is a big positive, as it will feed into higher spending across the wider regional economy.”

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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.

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ENDS

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