Positive signs for construction activity

Thursday, 28 November 2013, 11:46 am
Press Release: ASB Bank

Media release

ASB Cantometer Index

EMBARGOED until 5am Thursday 28 November 2013

Positive signs for construction activity

• The ASB Cantometer remained steady at 1 for the fourth consecutive month in November.
• After levelling off recently, building consent issuance surged higher in September.
• That suggests growth in construction activity could be set to accelerate once again.

The Cantometer snapshot remained steady again in November, sitting at 1 (zero marks the level of activity prior to the earthquakes). ASB Chief Economist Nick Tuffley says, “After making steady improvement since late last year, the Cantometer index has remained flat over the past four months. The data suggest that overall activity continues at a strong level, with strength in some areas and weakness remaining in others, as would be expected.”

Recent data included a very positive sign for construction activity. Mr Tuffley says, “Encouragingly, the data for September showed a strong rebound in consent issuance. In fact, Statistics New Zealand reported that the 599 new dwellings consented in the month was the highest recorded monthly total for the region.”

That highest recorded monthly total followed several months in which building consents had plateaued, suggesting that growth in construction activity was levelling off. “We were concerned about whether the cause was merely a temporary blip or emerging bottlenecks,” explains Mr Tuffley. “If the strength seen in September’s consents data continues, building work should accelerate once again over coming months reflecting the levelling off was perhaps a temporary blip.”

Other data has been more mixed. In particular, employment grew by 1.5% in Q3 (ASB seasonally-adjusted estimate). Mr Tuffley says, “We had been expecting a stronger rebound after a 1.4% drop in employment in the previous quarter. According to this measure, employment is still 2.7% below pre-earthquake levels.”

Outlook

The September consent issuance data provides some reassurance that construction activity is set for another growth spurt heading into summer. “The outlook for Canterbury remains very bright,” says Mr Tuffley.

In addition to better signs on the construction front, there has also been a lift in fresh home listings over the last couple of months. “That is a tentative sign the housing market’s supply constraints may be starting to ease. A huge amount of rebuilding work is still needed to replace the housing stock lost in the earthquakes though,” concludes Mr Tuffley.

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. 

If you would like to receive ASB updates and reports by email: https://reports.asb.co.nz/register/index.html

Embargoed_ASB_Cantometer_Index_28_November_2013.pdf

ENDS

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