ASB Regional Economic Scoreboard Q4 2023

Wednesday, 20 March 2024, 9:28 am
Press Release: ASB Bank

ASB’s Regional Economic Scoreboard shows Auckland coping best, amid economic slowdown

• Auckland has led the Scoreboard for the second consecutive quarter.
• This quarter’s Scoreboard ‘winners’ are those coping better than others rather than producing significantly positive results.
• Falling retail trade volumes and construction challenges continue across the country.

Challenging economic times reflected in the Scoreboard

The latest ASB Regional Economic Scoreboard has highlighted the challenging economic environment being felt across the country, with annual growth down across several metrics – notably construction and house prices.

The Scoreboard ranks the regions based on year-on-year growth across a range of measures including employment, retail sales and building consents.

ASB Senior Economist Chris Tennent-Brown says high inflation and interest rates are impacting households and businesses and the regions leading this quarter’s Scoreboard are those that are managing better than others, rather than performing strongly.

Despite this, Tennent-Brown says there are positive signs.

“New Zealand has hopefully weathered the worst of the overall global economic downturn and now we’re looking ahead to the next growth phase. While it may take some time for momentum to return, we’re optimistic about the coming few years once we’ve got the inflation genie back in the bottle. Lower interest rates are the usual precurser for growth phases but when this will happen is the big question for all regions over 2024.”

Auckland holds its lead in the Scoreboard

The City of Sails topped the Scoreboard for the second consecutive quarter, with the region benefitting from strong population and employment growth as well as a lift in house sales – up 13% year-on-year this quarter – and new car sales.

“Aucklanders love their cars, and new car registrations have lifted by more than anywhere else. Congestion isn’t going away any time soon,” says Tennent-Brown.

“Consumer confidence has improved in Auckland after five lower than average quarters. Confidence was only higher in the Bay of Plenty this quarter.

“Looking ahead, there are a mixture of forces influencing Auckland. More tourists spending will help but is unlikely to be enough to offset the drag from painful debt servicing costs and high cost of living pressures. There are also big questions around how the city’s migration boom will shake out. While this is relevant for all regions, Auckland typically picks up a big share of migration inflow.”

Wellington rebounds into 8th

The capital city had the biggest Scoreboard improvement this quarter, climbing six spots to take out 8th place.

“The coalition government is promising to cut down on government spending, so there’s going to be a cloud hanging over the outlook for Wellington as purse strings get pulled.

“There’s also been a lot of interest in Wellington infrastructure, notably with the work needed on the water network and suggestions of a new tunnel plan. Non-residential consents rose 27% in the region last year, however, the total construction pipeline (based on consents) has sprung a leak, down 17% year-on-year overall due to a fall in residential consent issuance.

“Retail sales values have taken a hit, declining 2.5% over 2023 and house prices have fallen 0.2% annually this quarter so while the region has recorded some strong movement on the Scoreboard, it remains to be seen whether this will continue.”

Construction capacity constraints continue

The construction sector has faced capacity constraints over the past few years alongside record high consent issuance. Construction consent values had this quarter’s biggest fall in Scoreboard metrics, with annual values declining by 17.3%. This was seen in all regions except for the West Coast, Gisborne and Hawke’s Bay, the latter two likely due to rebuilding post Cyclone Gabrielle.

The remaining areas saw mostly double-digit falls with the Waikato and Tasman regions recording declines of more than 35% year-on-year.

Tennent-Brown notes the fall has come after record highs, and while interest rate and capacity constraints continue, overall activity is still expected to remain high when compared with historical levels.

“It has been a challenge building all the projects that have been consented, and recent falls in consents from previous red-hot levels hopefully set the scene for a cooling of activity back to more sustainable levels.

“Despite the fall in consents, the construction sector will continue to be busy.”

The full ASB Regional Economic Scoreboard, along with other recent ASB reports covering a range of commentary, can be accessed at our ASB Economic Insights page: https://www.asb.co.nz/documents/economic-insights.html

@ASBBank @ASBMarkets www.asb.co.nz

The full report is attached.

About the ASB Regional Economic Scoreboard

The NZ Regional Economic Scoreboard takes the latest quarterly regional statistics and ranks the economic performance of New Zealand’s 16 Regional Council areas. The fastest growing regions gain the highest ratings, and a good performance by the national economy raises the ratings of all regions. Ratings are updated every three months, and are based on 11 measures, including employment, construction, retail trade, and house prices.

https://img.scoop.co.nz/media/pdfs/2403/ASB_Regional_Economic_Scoreboard_Q4_2023.pdf

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