Economic analysis for Auckland

September 2009

Shaping the recession

This month we summarise key economic indicators for Auckland city from the second quarter of 2009.

Auckland city's economic scoreboard

All values for Auckland city unless specified Year ended (unless specified)

Indicator	Mar 08	Jun 08	Sep 08	Dec 08	Mar 09	Jun 09	Time series link

GDP (annual growth)¹	4.24%	2.74%	1.20%	-0.85%	-2.34%	n/a	See long-term analysis

Unemployment rate (annual average)²	4.2%	4.6%	5.0%	5.4%	5.6%	6.0%	See long-term analysis

Inflation (national rate)³	3.4%	4.0%	5.1%	3.4%	3.0%	1.9%	See long-term analysis

TWI (national quarterly value)³	71.6	68.1	63.8	55.1	53.8	60.3	See long-term analysis

Exports from Auckland airport and seaport (annual growth)²	11.5%	11.7%	11.6%	10.6%	11.7%	10.3%	See long-term analysis

Retail sales growth (annual growth)²	3.6%	2.3%	1.5%	-0.5%	-1.6%	-2.0%	See long-term analysis

Business investment intentions* (net %) (quarterly value)⁴	-23.5%	-31.0%	-36.4%	-57.7%	-51.8%	-24.9%	See long-term analysis

Net migration (annual growth)²	-5.9%	-6.9%	-5.6%	0.6%	10.0%	22.7%	See long-term analysis

Annual number of residential building consents²	1,864	1.832	1.561	1,438	1,149	874	See long-term analysis

Annual value of non-residential building consents ($ million)²	$500	$558	$690	$731	$834	$945	See long-term analysis

1 Infometrics 2 Statistics New Zealand 3 Reserve Bank of New Zealand 4 Quarterly Survey of Business Opinion, NZIER *Net percentage is calculated by subtracting the percentage of business saying the business situation has deteriorated from those saying improved in the last three months

Second quarter round up

As reported in the recently released Auckland city business and economy report 2009, Auckland city's GDP growth declined 2.3 per cent in the year to March 2009, below the 1.0 per cent fall for New Zealand. This is the fourth consecutive quarter of negative GDP growth for the city and the fifth consecutive quarter of negative quarterly GDP growth for New Zealand.

Unemployment has continued to rise in the most recent quarter as redundancies increase and fewer new jobs are available for many of those entering the labour market. The unemployment rate reached 6.0 per cent in Auckland city in the year to June 2009. This is similar to the level experienced at the end of 2001 and is 1.0 percentage point above that of New Zealand (5.0 per cent¹).

Rising unemployment has contributed to tighter household budgets and low consumer confidence, resulting in decreasing retail sales for the third consecutive quarter. In the year to June 2009 sales declined by 2.0 per cent. This is the third consecutive quarterly decline after continuous growth over the last decade. The decrease has been driven largely by continuing declines in vehicle sales.

Conversely, significant growth has occurred in food retailing and cafes, restaurants and takeaways, some of which is explained by price increases in essential areas of expenditure such as groceries. Overall, declines in consumer spending are expected to continue into 2010.

Despite these negative trends, there continue to be a number of areas where news is better, providing hope for Auckland city's economic recovery over the next 18 months.

Net migration has grown 22.7 per cent over the year to June 2009 as arrivals have continued to climb and departures have declined. This will generate demand for goods and services including new housing and help reverse the declining number of consents for new residential dwellings.

Activity in the construction sector should continue to be strong, with consent values continuing to grow for new non-residential dwellings including a number of government initiated infrastructure projects.

Growth in exports through Auckland's ports has also remained high during the recession. Exporters benefited from a relatively lower New Zealand dollar early in the year, however with such a rapid appreciation in the last six months, there has been little currency driven demand for exporters more recently.

Easing inflationary pressures will also alleviate the pressure on households. The annual rate of inflation, as measured by the consumer price index (CPI) dropped to 1.9 per cent in the year to June 2009. This is down from an earlier peak of 5.1 per cent in the year to September 2008. Both tradable and non-tradable indices have eased in the last quarter, with a sharp drop in the tradable component in the December 2008 and June 2009 quarters (driven by big falls in oil prices).

In the June 2009 quarter, sentiment among Auckland city businesses about the general business situation and their investment intentions has improved significantly since an all time low point in the December quarter. However, results are still negative with a net 11.2 per cent of firms expecting the general business situation to deteriorate over the next six months and a net 24.9 per cent expecting to make less investment in new buildings over the next 12 months than the previous year. These results are similar to those seen at the beginning of last year as the New Zealand economy began to move into recession.

¹ This is an annual average unemployment rate for the year ended June 2009. This differs to the seasonally adjusted series used by Statistics New Zealand for the national rate. The annual average has also been used in this summary for the national rate to ensure consistency in comparison.

Published September 2009