Economic analysis for Auckland

February 2010

A happier new year?

Asian countries, led by China, are returning to their pre-crisis sustained growth rates. However, unemployment is still rising and the positive effects of the huge fiscal stimulus on growth are now negatively influencing public accounts. Some central banks have already started increasing interest rates and unwinding the monetary stimulus that prevented systemic financial bankruptcies. As hours worked have decreased faster than employment, it will take some time before economic growth impacts unemployment. This is true also for New Zealand and Auckland city where unemployment reached 6.3 per cent in the year to December 2009. This month we wrap up the key indicators available for Auckland for 2009.

Auckland city's economic scoreboard

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

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

GDP (annual growth)¹	1.87%	-0.03%	-1.36%	-2.25%	-2.41%	n/a	See long-term analysis

Unemployment rate (annual average)²	5.0%	5.4%	5.6%	6.0%	6.0%	6.3%	See long-term analysis

Inflation (national rate)³	5.1%	3.4%	3.0%	1.9%	1.7%	2.0%	See long-term analysis

TWI (national quarterly value)⁴	63.8	55.1	53.8	60.3	64.3	64.7	See long-term analysis

Exports from Auckland airport and seaport (annual growth)²	11.6%	10.6%	11.7%	10.1%	5.3%	-7.3%	See long-term analysis

Retail sales growth (annual growth)²	1.5%	-0.5%	-1.6%	-2.0%	-1.1%	n/a	See long-term analysis

Business investment intentions* (net %) (quarterly value)⁵	-36.4%	-57.7%	-51.8%	-24.9%	-10.8%	-8.9	See long-term analysis

Net migration (annual growth)²	-5.6%	0.6%	10.0%	22.7%	26.4%	30.7%	See long-term analysis

Annual number of residential building consents²	1,561	1,438	1,149	874	881	916	See long-term analysis

Annual value of non-residential building consents ($ million)²	$690	$731	$834	$945	$918	$971	See long-term analysis

1 Infometrics Ltd 2 Statistics New Zealand 3 Calculated from the Consumer Price Index 4 Reserve Bank of New Zealand 5 Quarterly Survey of Business Opinion, NZIER *Net percentage is calculated by subtracting the percentage of businesses saying they have less building investment intentions in the next 12 months than currently from those who intend to invest more in buildings in the next 12 months.

2009 round up

Auckland city's annual GDP decreased by 2.4 per cent in the year to September 2009 - the fourth consecutive quarter of negative annual growth. This is a greater decline than in New Zealand as a whole (-2.0 per cent) and contrasts with strong growth over much of the last decade. At the national level, GDP was up 0.2 per cent in both the June and September quarters (compared to the March and June 2009 quarters), following five consecutive quarters of contraction.

The unemployment rate is still rising in New Zealand and Auckland city. It increased more than expected at the end of 2009 to its highest point in 10 years. Growth in those entering the labour force but unable to find work has driven this rise in unemployment, while the number of workers actually losing their job has begun to slow. BNZ economists predict the national unemployment rate to peak around the middle of this year. The annual average unemployment rate reached 6.3 per cent for Auckland city in the year to December 2009, compared to 6.1 per cent nationally¹.

Auckland city's annual retail sales rose slightly in the year to September 2009 compared to the year to June 2009. However, annual growth still remains negative, declining by 1.1 per cent since the year to September 2008. Annual declines in sales have been driven by decreases in automotive vehicle retailing and automotive vehicle services². Main areas of growth have been food retailing and sales at cafes, restaurants and takeaway stores.

An increase in the cost of food at the national level may partly account for growth in Auckland city's food sales. In the September 2009 quarter, meat, poultry and fish, and grocery food experienced annual price increases of 9.6 and 5.3 per cent respectively. Declines in the price of fuels may partly account for the drop in retail sales on automotive vehicle services.

However, most recent monthly data in retail sales at the national level is showing some signs of recovery.

The annual value of exports through Auckland's ports has continued to decline in the year to December 2009. Annual exports have been in decline for the last seven months, although annual growth has only been negative for the last two months. At $13,073 million, annual exports in the year to December 2009 were 7.3 per cent below those in the year to December 2008 ($14,106 million)³ and below a peak of $14,597 million in the year to May 2009. This decline has been driven primarily by a drop in the value of exports through the seaport, although the value of exports through the airport is also declining. Export growth has been hindered by a combination of a relatively high dollar and an ongoing general reduction in global demand.

On a more positive note, there are also a number of areas showing clear signs of improvement. Annual net migration to Auckland city has grown throughout 2009 due to a drop in the number of departures and, until the last two quarters, a growing number of arrivals. In the year to December 2009, Auckland city had a net gain of 8612 people due to migration, which is 31 per cent higher than the year to December 2008. The increased net migration supports the demand for goods and services including new housing.

The decline in consents for new residential dwellings in Auckland city has halted with a slight increase across the last two quarters. In the year to December 2009, 916 consents were issued for new residential dwellings, up from 874 in the year to June 2009. However, this is down 36 per cent from a year earlier (1438 consents in the year to December 2008) and well below earlier peaks of 5622 consents in 2004.

Meanwhile, contrary to most expectations, the annual value of consents in the non-residential sector has continued to grow, albeit with a small decline in the September 2009 quarter. Annual growth still remains strong, but is slower than that experienced in the first half of 2009. Increasing vacancy rates - particularly in the CBD where CBRE estimate total vacancy has reached 13.3 per cent - are likely to temper these growth rates.

New Zealand's inflationary pressures increased slightly as the Consumers Price Index rose to 2 per cent in the year to December 2009. This is down from 3.4 per cent a year earlier and the peak of 5.1 per cent in the year to September 2008. Annual tradable inflation rose sharply in the December 2009 quarter, driven by global oil prices, while non-tradable inflation eased.

In the December 2009 quarter, sentiment among Auckland city businesses about the general business situation remained at a high point with a net 45.6 per cent of firms expecting the general business situation in New Zealand to improve in the next six months (compared to the current situation). However, results are still negative for investment intentions with a net 8.9 per cent of firms expecting to make less investment in new buildings over the next 12 months (compared to last year). This is up from a low point of 57.7 per cent of firms expecting to invest less in the December 2008 quarter.

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.

² This includes fuel retailing, automotive electrical services, smash repairs and tyres.

³ Exports and imports data is recorded in current values and therefore, represents a nominal increase rather than a real increase.

Published February 2010