Canterbury activity slip on non-residential consent issuance

Wednesday, 29 January 2014, 11:06 am
Press Release: ASB Bank

29 January 2014

Canterbury activity slips on temporary dip in non-residential consent issuance

• The ASB Cantometer dipped to 1.1 in January.
• Low non-residential consent issuance dragged the index lower.
• Strong house price increases are continuing, driven by a supply shortage.

The ASB Cantometer index dipped by 0.1 in January, to 1.1. The index is still at a strong level though, reflecting the bright outlook for the region’s economy.

“The Cantometer index was slightly lower this month as a result of lower non-residential consent issuance, which can be very volatile due to a small number of big projects,” says ASB Chief Economist Nick Tuffley.

Mr Tuffley goes on to explain, “While non-residential consent issuance was low in November, it is important to note it is still increasing on a trend basis. We anticipate commercial construction will increase rapidly over the next year or two and that consents will soon rebound from the dip.”

Mr Tuffley also points out the pace of construction cost increases has started to slow.

“For the year to December 2013, the cost of building a new house in the region increased by 9.5%, slower than the peak annual growth of 12.2% in March 2013. It doesn’t look like cost increases will get out of control and pose serious risks to broader inflation.”

Yet, the Canterbury housing market remains under pressure.

“Recent QV data showed house prices rose 13.9% over the year to September 2013,” Mr Tuffley says. “The region is still suffering from supply shortages. But residential consent issuance continues to rise, pointing to more new houses coming through the pipeline. With this in mind, pressures should start to ease a little over 2014.”

Outlook
The strong overall level of the Cantometer index suggests that the outlook for 2014 is very bright. “A lot of progress was made in 2013 and rebuilding activity will continue to accelerate over 2014. The rebuild-driven boost to population, employment and incomes will continue to drive strong growth in overall economic activity,” 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.

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ENDS

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