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The economy

Economic analysis for Auckland

July 2010 | June 2010 | April 2010 | February 2010 | November 2009 | September 2009 | July 2009 | May 2009 | April 2009 | March 2009 | December 2008 | July 2008 | March 2008 | December 2007

June 2010

Ready, steady, go: The economy jolts forward

Auckland city's economic scoreboard
All values for Auckland city unless specified
Year ended (unless specified)
Indicator   Dec 08   Mar 09   Jun 09   Sep 09   Dec 09   Mar 10   Time series link
GDP
(annual growth)1		   -0.03%   -1.36%   -2.25%   -2.41%   -1.0%   n/a   See long-term analysis
Unemployment rate
(annual average)2		   5.4%   5.6%   6.0%   6.0%   6.3%  

6.6%

   See long-term analysis
Inflation
(national rate)3		   3.4%   3.0%   1.9%   1.7%   2.0%   2.0%   See long-term analysis
TWI
(national quarterly value)4		   55.1   53.8   60.3   64.3   64.7   65.1   See long-term analysis
Exports from Auckland
airport and seaport
(annual growth)2		   10.6%   11.7%   10.1%   5.3%   -7.3%   -11.5%   See long-term analysis
Retail sales growth
(annual growth)2		   -0.5%   -1.6%   -2.0%   -1.1%   1.0%   3.6%   See long-term analysis
Business investment intentions*
(net %)
(quarterly value)5		   -57.7%   -51.8%   -24.9%   -10.8%   -8.9%   4.2%   See long-term analysis
Net migration
(annual growth)2		   0.6%   10.0%   22.7%   26.4%   30.7%   13.3%   See long-term analysis
Annual number of residential
building consents2		   1,438   1,149   874   881   916   945   See long-term analysis
Annual value of
non-residential
building consents
($ million)2		   $731   $834   $945   $918   $971   $875   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.
                             

Auckland city's economy is starting to gain traction in the wake of financial recession. The recently announced budget reflects this with a focus on taxation rather than economic recovery. A number of economic indicators suggest businesses can breathe easy over the coming months, none more so than annual retail sales growth.

In Auckland city, retail sales in the year to March increased by 3.6 per cent. This is a positive sign after 1 per cent annual growth in the year to December 2009, which followed four consecutive quarters of negative growth. This optimism is reflected in business expectations of profit levels over the next three months, where over a third of businesses expect profits to increase in the three months to June 2010.

On the back of this improved growth in the retail sector, business investment intentions finally moved back into positive territory after 10 consecutive quarters of poor investment intentions, where businesses intending to invest in buildings were well outnumbered by those not intending to invest. These are the first signs of a revival in investment, which will be crucial for future growth prospects for the Auckland economy.

On top of this, the city continues to experience strong net migration figures, with 13.3 per cent migration growth in the year to March 2010, although annual net migration growth has slowed somewhat in the last quarter (from 8612 to 8208).

Despite these encouraging figures, unemployment continued to rise, which is typical of unemployment measures, which tend to lag economic cycles because businesses tend to be slow in recruiting new staff, preferring to increase existing staff hours first (where these staff had reduced hours because of the recession).

Residential building consents remain at some of their lowest levels over the last 10 years, despite a small increase in the December 2009 and March 2010 quarters.

Inflation figures remained very low and within the Reserve Bank's targets, although inflation is widely expected to increase as the recovery continues and when the Goods and Services Tax increases from 12.5 per cent to 15 per cent on 1 October, there is likely to be a short-term inflationary effect.

The trade-weighted index was 65.1 in April, remaining above the 10-year average of 62.0. This continues to put a degree of pressure on exporters by reducing their competitiveness in international markets, which has been reflected through a 11.5 per cent decline in export through Auckland in the year to March 2010.

Two recent factors are pushing the exchange rate in opposite directions. First, the volatility of the Euro has spooked investors, resulting in the devaluation of high-risk currencies such as the Australian, Canadian and New Zealand dollars. Second, the 2010 budget was received well in the currency market with a strengthening dollar. This is likely to have been driven by the drop in all income tax brackets and the reduction in the company tax rate from 30 per cent to 28 per cent.

 

Published June 2010