Mainland business confidence grows
Christchurch economist ROBIN CLEMENTS takes the pulse of the South Island economy. Reconstruction in Canterbury continues to gather pace and promises to heighten regional activity in coming quarters. Business confidence has increased in the Mainland though consumer confidence and the housing markets in other regions is lagging behind the rebuild city.
At a glance South Island trend growth is 3.1 per cent, down slightly from 3.3 per cent trend growth in the prior quarter.
Business confidence in the South Island has improved as optimists take charge.
Total guest nights in the South Island make progress from a lower level.
Businesses employment intentions remain are about the same in the latest quarter, as the prior quarter.
Businesses investment intentions remain at top end of historical experience.
Mainland manufacturing sector shows a turnaround to gains, particularly in Canterbury.
Value of retail sales in the South Island increases.
Consumer confidence improved in all the South Island regions in the fourth quarter.
New dwelling consents for the Mainland continue to trend higher.
House price data on the increase for Christchurch, Nelson, Invercargill and Dunedin.
Commercial and industrial building consents show strong ongoing growth.
South Island employment increases quarter on quarter.
Mainland unemployment rate falls to 5.3 per cent.
Consumer price index for the South Island shows inflation above North Island.
Growth momentum in the Mainland economy pauses
The ANZ Bank's Composite Indices of Regional Economic Activity for the September 2012 quarter suggest activity for New Zealand as a whole grew by 0.1 per cent quarter on quarter, after June 2012 quarter growth of 0.6 per cent q/q. Compared with the September 2011 quarter, the regional activity measure suggests New Zealand's economy grew 1.3 per cent over the year.
National growth for the September quarter consisted of a 0.1 per cent q/q contraction in the North Island and 0.8 per cent q/q growth for the South Island. It was the sixth consecutive quarter of growth for the Mainland, and its longest period of back-to-back growth since 2005-07. Annual growth in the September 2012 quarter for the South Island was 3.0 per cent year on year, whereas the North Island recorded 0.8 per cent y/y expansion. Within the South Island regions for the September 2012 quarter, growth was the strongest in Canterbury, up 1.9 per cent q/q, followed by Southland, up 0.9 per cent q/q. Nelson-Marlborough (-0.5 per cent), the West Coast (-0.7 per cent) and Otago (-1.4 per cent) all contracted in the September period, quarter on quarter.
Meanwhile, our estimate of trend growth for the South Island (used to generate our Growth Speedometer reading) was 0.8 per cent q/q for the September 2012 quarter. This equates to a 3.1 per cent annualised trend rate of growth and represents a slight slowing on the 3.3 per cent pace of growth noted in our previous report.
Business confidence rebounds
Business confidence among Mainland firms in the December 2012 quarter improved from net 1 per cent optimism in the September quarter to net 24 per cent optimism, taking sentiment back towards recent highs. As would be expected, profit expectations for South Island-based firms also improved, net -11 per cent to +3 per cent, and are now back above average.
Conversely, investment intentions for buildings eased a little, from net +10 per cent to +7 per cent, but remain at the top end of historical experience. Meanwhile, employment intentions for the South Island in the December quarter were largely unchanged, net +1 per cent to +2 per cent, at just above average.
For the manufacturing sector there has been something of a turnaround, although more so for Canterbury than Otago.
The PMI for Canterbury/ Westland has put on three consecutive monthly gains, from contraction back into expansion and the best three-month improvement since early 2010.
Consumers regain confidence
The value of retail sales in the South Island increased 0.7 per cent q/q in the September 2012 quarter, up 3.0 per cent year on year. While the rate of growth has moderated since the post-February 2011 Christchurch earthquake rebound, this was the seventh consecutive quarter of growth.
Meanwhile, car registrations in the Mainland jumped sharply in October - the strongest since January 2011 - and, despite a retracement in November, trend growth has resumed, with the trend number of car registrations the highest since late-2008.
Surveyed consumer confidence improved in all South Island regions in the December quarter, with the exception of Nelson- Marlborough/West Coast. Consumer confidence improved the most in Canterbury, leaving the region as the only region to record above-average sentiment. The consumer confidence trend estimates show Southland as the only region still deteriorating.
Building consents reveal growth
While house sales for the Mainland fell in the final month of 2012, sales for the three months to December were the highest since the three month period to November 2009.
Meanwhile, new dwelling consents for the South Island continue to trend higher.
The month-to-month figures have been volatile, while the November lift was led by a 9.1 per cent increase in Canterbury dwelling consents, which were up 69.7 per cent on November 2011.
The latest quarterly Quotable Value house price data for the September 2012 quarter show that house prices increased in Christchurch, up 1.9 per cent q/q; Nelson, up 1.2 per cent q/q; Invercargill, up 1.1 per cent q/q; and Dunedin, up 0.2 per cent q/q. The trend house price growth estimates suggest values in Christchurch are increasing the fastest, with prices in Dunedin rising more modestly, while Nelson and Invercargill are lagging behind.
The most recent estimates for the value of non-residential building consents in the Mainland show ongoing strong growth in the three months to November - up 51 per cent on the same period in 2011. The largest contribution to the increase in the total value of non- residential building consents came from the Canterbury region, up 98 per cent. Trend growth in the value of non-residential building consents is holding at a rapid pace, with annual trend growth now at an unprecedented pace.
Employees more upbeat about job prospects
Our seasonally adjusted estimates of the official Household Labour Force Survey data for the South Island suggest that employment increased 0.9 per cent q/q in the September 2012 quarter, only partly recouping the decline reported for the prior quarter. Employment in Canterbury rose 5.4 per cent in the September quarter, after falling 6.7 per cent in the June quarter.
Meanwhile, the Mainland unemployment rate fell to 5.3 per cent, although trend unemployment remains on a rising path.
Employees were more confident in the December quarter about labour market prospects, with perceptions of future job opportunities breaking a deteriorating trend and perceptions of the current job situation the best since 2008.
Job security gave back some of its prior quarter gain, to drop back to below average.
Meanwhile, in the December quarter, it became harder to find skilled workers but easier to find unskilled workers, while the net inflow of migrants was the highest since March 2010.
Mainland inflation above that of the North Island
The consumers price index (CPI) for the South Island in the September 2012 quarter rose by 0.5 per cent q/q (up 1.2 per cent y/y), above the nationwide CPI increase of 0.3 per cent (up 0.8 per cent y/y). Annual CPI inflation for the North Island was 0.7 per cent.