Economic analysis for Auckland
November 2009 |
September 2009 |
July 2009 |
May 2009 |
April 2009 |
March 2009 |
December 2008 |
July 2008 |
March 2008 |
December 2007
July 2009
The rollercoaster continues
With a full suite of results now available for the first quarter of 2009, it is apparent what a rollercoaster ride the Auckland economy is on. GDP growth is well down, unemployment is up and retail sales have turned negative. At the same time, the value of commercial building consents continues to grow, net migration is up and export growth remains steady.
This month we review results for the first quarter of 2009 and focus on retail sales and car registrations.
Auckland city's economic scoreboard
All values for Auckland city unless specified
Year ended (unless
specified) |
|
| Indicator |
|
March 08 |
|
June 08 |
|
September 08 |
|
December 08 |
|
March 09 |
|
Time series link |
|
| GDP (annual growth)1 |
|
4.24% |
|
2.74% |
|
1.20% |
|
-0.85% |
|
-2.34% |
|
See long-term analysis |
|
| Unemployment rate (annual average)2 |
|
4.2% |
|
4.6% |
|
5.0% |
|
5.4% |
|
5.6% |
|
See long-term analysis |
|
| Inflation (national rate)3 |
|
3.4% |
|
4.0% |
|
5.1% |
|
3.4% |
|
3.0% |
|
See long-term analysis |
|
| TWI (national quarterly value)3 |
|
71.6 |
|
68.1 |
|
63.8 |
|
55.1 |
|
57.9** |
|
See long-term analysis |
|
Exports from Auckland airport
and Auckland seaport (annual growth)2 |
|
11.5% |
|
11.7% |
|
11.6% |
|
10.6% |
|
11.7% |
|
See long-term analysis |
|
| Retail sales growth (annual growth)2 |
|
3.6% |
|
2.3% |
|
1.5% |
|
-0.5% |
|
-1.6% |
|
See long-term analysis |
|
Business investment intentions* (net percentage)
(quarterly value)4 |
|
-23.5% |
|
-31.0% |
|
-36.4% |
|
-57.7% |
|
-51.8% |
|
See long-term analysis |
|
| Net migration (annual growth)2 |
|
-5.9% |
|
-6.9% |
|
-5.6% |
|
0.6% |
|
10.0% |
|
See long-term analysis |
|
| Number of residential building consents2 |
|
1,864 |
|
1.832 |
|
1.561 |
|
1,438 |
|
1,149 |
|
See long-term analysis |
|
Value of non-residential building consents
($ million)2 |
|
$500 |
|
$558 |
|
$690 |
|
$731 |
|
$834 |
|
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
** May 2009 figure. |
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First quarter round up
Auckland city continues to feel the full brunt of global contraction with the city's economy shrinking by 2.34 per cent in the year to March 2009. This followed a contraction of 0.85 per cent in the year to December 2008.
Auckland city's unemployment rate increased to 5.6 per cent over the March quarter (from 5.4 per cent in December). While the increase was less than many expected, Auckland city's rate continues to track well above the New Zealand rate of 5 per cent.
Inflation, as measured by the Consumer Price Index (CPI), continued to fall in the March quarter. Inflation was 3 per cent in the year to March 2009, down from 3.4 per cent in the year to December 2008. The fall in inflation is mostly accounted for by tradable consumer items which declined by 0.4 per cent over the March quarter (tradable items are those consumption goods which have their prices determined on world markets).
The New Zealand dollar appreciated substantially over the last quarter, a most unwelcome surprise for New Zealand exporters. The TWI (a currency index weighted against our main trading partners) grew by 19 per cent in the three months to June 12, from 51.2 to 60.2. This was driven by a 31 per cent appreciation against the US dollar and a 29 per cent appreciation against the Yen. The strength in currency has resulted from a declining US dollar in the face of further bad economic indicators in the US economy and increased risk appetite among investors. Many economists feel the New Zealand dollar is over valued given the current economic climate. A strong currency will delay the onset of a full economic recovery by undermining the competitiveness of our exporters in international markets.
Export growth for Auckland airport and seaport continued to show resilience in an economic environment characterised by waning demand and volatile exchange rates. Exports through the Auckland seaport and airport increased by 11.7 per cent in the year to March. In contrast, retail sales experienced further declines in the year to March (see Focus on retail sales growth, below). Business investment intentions showed a marginal improvement but are still firmly negative with a net 51.8 per cent of firms expecting to invest less in buildings and a net 43.7 per cent of firms intending to invest less in plant & machinery over the next 12 months.
Migration received a significant boost over the last quarter, increasing by 10 per cent in the year to March. Migrant growth will provide much needed stimulation for the domestic economy in terms of increased spending. For this reason, migration is one of the identified
'green shoots' of the Auckland city economy.
The number of residential consents continued to fall in the year to March as it has done consistently over the past year. In contrast, the value of non-residential building consents continues to defy the odds, increasing for the fourth consecutive quarter, to $834 million - 14 per cent higher than December 2008.
Within the Auckland region, this trend is unique to Auckland city and the result of a number of significant office developments in the Auckland CBD (Deloittes, Telecom, Westpac) in addition to significant construction work at Eden Park and Mt Eden Prison. Importantly, the value of consents does not necessarily reflect real development, but rather a mixture of actual developments and an intention to develop in the future.
Focus on retail sales growth
Auckland city's retail sales dropped by 3.6 per cent between March 2008 and March 2009 (see Figure 1). This compares to a decline of 6 per cent for the rest of the region and 1.9 per cent for New Zealand. The automotive sector accounts for a significant proportion of Auckland city's retail decline. Automotive vehicle retailing and services declined by 23 per cent and 7 per cent respectively. Excluding the automotive industry, retail sales in Auckland city actually grew by 1.9 per cent while New Zealand retail sales grew by 2.3 per cent.
Other items with significant declines in Auckland city include hardware (-16.4 per cent), furniture, floor coverings and appliance retailing (-13.6 per cent) and clothing and soft goods (-6.6 per cent). Several areas of expenditure recorded significant growth over the March year. Other retails sales recorded the highest growth in Auckland city with an 18.7 per cent increase. Other significant areas of growth in Auckland city include footwear (11.2 per cent), cafes, restaurants and takeaways (10.3 per cent) and recreational goods (8.2 per cent).
Figure 1: Retail sale growth (quarter on quarter) by area, March 2009
At a national level, aggregated retail sales are still declining, but at a slower rate in April than in previous months (January, February and March). This is shown in Figure 2. For this reason, retail sales have been identified as a potential
'green shoot' in the economy. As city level data is only available quarterly it is unclear whether this improvement is occurring in Auckland city. This may be an indication that we are through the worst of the economic downturn.
Figure 2: New Zealand and Auckland city retail trade growth, 2008/2009
Focus on car registrations
Car registrations in the Auckland region declined by 28 per cent in the year to April 2009 compared to the year to April 2008. This is the highest rate of decline since the early 90s when annual car registrations plummeted by 35 per cent.
Registration troughs roughly coincide with economic recessions. The lowest level of car registrations was recorded during the 1991/1992 recession, with other troughs recorded over the Asian financial crisis (1997/1998) and the dot com downturn (2000/2001).
Car registrations for the Auckland region have been declining for most of the last four and a half years (Figure 3). A declining number of car registrations over this period has coincided with steadily rising petrol prices and increased usage of public transport. Car registrations have been unresponsive to substantial drops in petrol prices since the beginning of 2009. This is likely the result of economic conditions characterised by rising unemployment, difficulty in accessing credit, a general reluctance to purchase big-ticket items and the expectation that petrol price will rise in the medium term.
Coinciding with falling car registrations, there is also evidence of an increase in public transport usage. The Auckland Regional Transport Authority reports bus patronage in the nine months to March 2009 is up 10 per cent while train patronage is up 16 per cent . This may be the result of a substitution away from private vehicles following high petrol prices and economic recession.
Figure 3: Growth rates for car registrations in Auckland region and New Zealand, 1991-2009 (year on year)
Published July 2009
