TIMARU ECONOMIC MONITOR

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					                                                                                              Issue No. 78 February 2006

                   TIMARU ECONOMIC MONITOR

                     Introduction                               Timaru District Council is committed to recycling.
                                                            Timaru will start kerbside recycling in July this year. A
The Timaru Economic Monitor is a monthly publication        three-bin system will allow people to sort their waste into
prepared for the Aoraki Development Trust.        This      organics (collected weekly), recyclables (collected
newsletter contains the latest information on recent        fortnightly) and remaining rubbish (collected fortnightly).
business events, and trends in economic indicators and      Prices will increase though, with households paying
business confidence.                                        about $240 annually for the service, an increase from the
                                                            current $104 charged.         The recycling system is
                                                            estimated to cost about $60 million over 15 years and
             LOCAL ECONOMIC UPDATE                          create 15 new jobs.

This section of the Timaru Economic Monitor presents
current information on recent local business events and
investment, along with an update on key local economic
indicators.                                                     The convenience of smaller, lighter coins will come at
                                                            a cost for motorists parking in Timaru. The Reserve
                      Local News                            Bank will introduce the new 50c, 20c and 10c coins on
                                                            July 31. The coins will be smaller, lighter and not
                                                            accepted by parking meters, vending or coin-operated
   Many British professionals and their families are        machines. Around $65,000 had been allocated by the
moving to South Canterbury. Removal firms operating         council to modify and replace the city's parking meters.
in South Canterbury note that Britons, followed by          Although some of the council's meters and pay-and-
Australians and South Africans, appear to be                display machines have coin-recognition software and
predominant nationalities moving to South Canterbury.       can be re-programmed to accept the new coins, many
Most immigrants are professional people with families.      others will need to be replaced.
According to Statistics New Zealand, 21,573 immigrants
from the United Kingdom came to New Zealand for the
year ending June 2005, making the British the largest
migrant group.                                                   The algae didymo has been found in the upper
                                                            Ahuriri River posing a threat to power generation and
                                                            wildlife. The didymo was noticed by an Australian
                                                            angler who informed the Department of Conservation.
     The textile mill once owned by Alliance Textiles and   The Ahuriri supports riverbed birds such as the kaki/back
Swanndri will reopen next year and will employ 18           stilt, wrybill, black fronted tern, banded dotterel and black
people. The plant will re-open as South Canterbury          billed gull. The Ahuriri is the 10th river in which the
Textiles Limited under the management of two former         algae has been found.
staff, Andrew Miller and Tony Gallagher. The company
has a contract with Swandri to produce bedding products
for the Royal Wool brand. The company will focus on
producing woollen fabrics for niche markets and is not           South Island biosecurity has been breached by a bug
setting itself up to directly compete against Swandri.      that threatens to wipe millions of dollars off the
The emphasis for South Canterbury Textiles Limited will     productivity of pastoral farms. AgResearch says that
likely be on producing high value innovative products.      white clover previously confined to the North Island has
Initially the company will open with eight staff.           been detected in traps around Christchurch airport.
                                                            AgResearch says that it is unlikely to be an isolated
                                                            infestation.     The weevil cuts clover's ability to fix
                                                            nitrogen, reducing pasture productivity unless more
    This year's wine and food festival fundraiser for the   fertiliser is applied to compensate for it. According to a
South Canterbury Hospice was very successful. A new         New Zealand Institute of Economic Research study the
festival layout promoted a relaxed atmosphere. There        economic impact of clover root weevil is between $0.2
were around 3000 visitors to David Attewell's Hadlow        billion and $1 billion/year should it spread nationwide.
Road property over the duration of the event. People
started arriving in numbers by mid morning. Overall the
festival attracted a wide cross-section of the community
to raise money for a good cause.
                                                            Economic Growth                                                                120                                                                      30%

                                   5
                                                                                                                                           100                                                                      20%

                                   4
                                                                                                                                               80                                                                   10%



              e r-o -ye r ro th
             Ya n ag w
                                   3                                                                                                           60                                                                   0%

                                   2                                                                                                           40                                                                   -10%


                                   1                                                                                                           20                                                                   -20%

                                                                                                                                                0                                                                    -30%
                                   0
                                   Dec-03              Jun-04                      Dec-04                Jun-05        Dec-05                    Jan-04        Jul-04            Jan-05        Jul-05          Jan-06

                                                                    Timaru                     New Zealand                                                No. of House Sales         Annual average % change

Source: APR Consultants                                                                                                            Source: Real Estate Institute of New Zealand
                                                                                                                                   The median house sale price in Timaru increased slightly
The APR index of economic growth is constructed from                                                                               from $178,250 in December 2005 to reach $179,000 in
key indicators. The provisional growth index shows that                                                                            January 2006. However, the number of sales was subdued
both the local and the national economies have                                                                                     in January with only 51 homes changing hands. This was
strengthened slightly at the start of the 2006 year.                                                                               the lowest level recorded over the past five years. The
                                                                                                                                   annual average growth rate in the number of house sales in
                                                         Key Indicator Trends                                                      Timaru was -6.4% for the year ended January 2006.

This section examines trends in key indicators of Timaru
                                                                                                                                                                        Retail Sales
District’s economic activity.
                                                                                                                                          800                                                                           10%

                                                            Building Consents                                                             700
                                                                                                                                          600
                                                                                                                                                                                                                        8%

                                                                                                                                                                                                                        6%
                                  33                                                                                        80%           500
                                                                                                                                                                                                                        4%




                                                                                                                                     m
                                  30                                                                                        70%           400




                                                                                                                                    $
                                  27                                                                                                                                                                                    2%
                                                                                                                            60%           300
                                  24                                                                                                                                                                                    0%
                                                                                                                            50%           200
                                  21
              No. of Consents




                                                                                                                            40%                                                                                         -2%
                                  18
                                                                                                                                          100
                                                                                                                            30%
                                  15                                                                                                           0                                                                        -4%
                                                                                                                            20%                 Dec-03         Jun-04           Dec-04         Jun-05          Dec-05
                                  12
                                                                                                                            10%
                                   9                                                                                                                            Re tail sales       Annual average % change
                                   6                                                                                        0%

                                   3                                                                                        -10%   Source: Business Statistics, Statistics New Zealand
                                   0                                                                                        -20%
                                       Jan-04          Jul-04                  Jan-05                 Jul-05       Jan-06

                                                         No. of Consents            Annual Avg. % change (No.)
                                                                                                                                   Retail sales were robust in Canterbury in December 2005.
Source: Dept of Statistics Building Surveys and Vitals Section                                                                     The value of retail sales in Canterbury climbed to $757.5
                                                                                                                                   million, the first time that monthly sales have exceeded $700
Only eight permits were issued for new dwellings during                                                                            million. The annual average growth rate in the value of retail
the month. This was the second lowest number recorded                                                                              sales in Canterbury was 8.4% for the 2005 calendar year.
over the past two years, and was well below the 31
issued just three months ago. The annual average
                                                                                                                                                                        Overseas Cargo
growth rate in the number of new building consents
issued in Timaru has decreased sharply from 22.7% for                                                                                    150                                                                            60%
the year to December 2005 year to 5.7% for the year to                                                                                   120                                                                            50%
January 2006.                                                                                                                                                                                                           40%
                                                                                                                                         90
                                                                                                                                                                                                                        30%
                                                                                                                                         60
                                                                Car Registrations                                                                                                                                       20%

                                  300                                                                                      20%
                                                                                                                                         30                                                                             10%
                                  250                                                                                      15%            0                                                                             0%
 N of car registrations




                                  200                                                                                      10%                 Jan-04        Jul-04             Jan-05        Jul-05           Jan-06

                                  150                                                                                      5%                                 Exports ($m)         Annual average % change

                                  100                                                                                      0%
                                                                                                                                   Source: Statistics New Zealand
  o.




                                   50                                                                                      -5%



                                                                                                                                   Following a boom in December 2005, export activity from the
                                       0                                                                                   -10%
                                           Jan-04      Jul-04                  Jan-05                Jul-05       Jan-06

                                                      No. of Car Regist rat ions        Annual average % change
                                                                                                                                   Port of Timaru levelled off in January 2006. There were
Source: Land Transport Safety Authority                                                                                            27,971 tonnes of cargo conveyed overseas through the Port
                                                                                                                                   of Timaru during January. This tonnage was valued at
There was a total of 185 cars (including both new and                                                                              around $69 million. Strong growth over the past 12 month
ex-overseas car types) registered in local postal offices                                                                          period has pushed the annual average growth rate in the
during the month, up by 10 on December 2005 but down                                                                               value of exports from the Port of Timaru up to 20% for the
by nine compared to January 2004. The annual average                                                                               year to January 2006.
growth rate in the number of car registrations recorded in
Timaru was -6.0% for year ended January 2006.                                                                                                                Summary
                                                                                                                                   The number of new building permits issued in Timaru in the
                                                    Residential Real Estate Sales                                                  January 2006 descended to a two-year low but the number of
                                                                                                                                   car registrations increased slightly from the number recorded
                                                                                                                                   in December 2005. The volume of house sales in Timaru
                                                                                                                                   was subdued in January 2006 as was the level of export
                                                                                                                                   activity from the Port of Timaru. Overall, annual average
                                                                                                                                   growth in the Timaru economy increased slightly over the last
                                                                                                                                   three months of 2005. The trend in Timaru’s economic
                                                                                                                                   growth over the December quarter of 2005 was similar to that
                                                                                                                                   for New Zealand over the same period although growth in
                                                                                                                                   Timaru’s economy was greater than that in the national
                                                                                                                                   economy.
            NATIONAL ECONOMIC UPDATE                                                                           RBNZ Held the OCR in March 2006
This section of the Timaru Economic Monitor presents                                                 As widely expected, the Reserve Bank of New Zealand
current information on recent national business events,                                              [RBNZ] left the Official Cash Rate [OCR] unchanged at
along with an update on key economic indicators.                                                     7.25% in March 2006. However, compared with the
                                                                                                     previous Monetary Policy Statement [MPS], the tone in
           Labour Market Has Started to Ease                                                         the latest MPS was mild, suggesting a neutral stance
                                                                                                     has been adopted.
Statistics New Zealand [SNZ] released the December
2005 quarter Household Labour Force Survey [HLFS]
                                                                                                     The RBNZ acknowledged recent weak economic
results in February 2006. According to the HLFS, the
                                                                                                     indicators by revising down its GDP forecast from 3.0%
level of seasonally adjusted employment decreased by
                                                                                                     to 2.5% for the March 2006 year, and from 2.0% to 1.5%
1,000 (or 0.1%) over the quarter. Unemployment
                                                                                                     for the year after. The RBNZ also lowered its medium
dropped by 2,000 (or 1.9%) over the same period. The
                                                                                                     term inflation forecast to an average of 2.5% for the
unemployment rate in the December quarter of 2005 is
                                                                                                     March 2007 and 2008 years. As a result, the RBNZ
estimated to be 3.6%. On an annual basis, there was
                                                                                                     stated “we do not expect to raise interest rates again this
an increase of 31,000 (or 1.5%) in the number of people
                                                                                                     cycle”, but also added “we do not expect to be in a
employed.
                                                                                                     position to ease policy this year”.
Underlying the latest HLFS results are a decrease of
0.6% in full-time employment (the first fall in four years)                                                                 Key Indicator Trends
and a growth of 2.4% in part-time employment. While
employment has been increasing on an annual basis                                                                            Building Consents
since the March 1999 quarter, the annual growth rate in                                                 3500                                                           30%
employment for the December 2005 quarter was the                                                        3000
                                                                                                                                                                       20%
lowest rate achieved over the past three years, and was                                                 2500
much lower than the 3.6% that occurred in the previous                                                  2000                                                           10%

quarter.                                                                                                1500                                                           0%
                                                                                                        1000
                                                                                                                                                                       -10%
                                                                                                         500
The number of males employed increased by 6,000 (or                                                         0                                                       -20%
0.5%) over the December quarter while the level of                                                           Jan-04       Jul-04        Jan-05     Jul-05      Jan-06

females employed moved in the opposite direction, with                                                          No. of building consents     Annual average % change

a fall of 7,000 (or 0.7%) woman employed.              A                                              Source: Dept of Statistics Building Surveys and Vitals Section
breakdown of the data by Industry reveals that the
service sector remained the key driver of job growth,                                                A total of 1,900 permits were issued for new dwellings in
while manufacturing and the primary industries were                                                  New Zealand during the first month of 2006. These
squeezed by the strong New Zealand dollar. There                                                     were worth around $413.8 million. This was the lowest
were job increases of nearly 34,000 in the service sector                                            number of permits issued over the past 12 months, and
compared with a small increase of 2,000 in the primary                                               was only two greater than the 1,898 issued in January
sector over the December quarter.                                                                    2005. The annual average growth rate in the number of
                                                                                                     new building consents issued in New Zealand was -15%
In the December quarter, employment in the                                                           for the year ended January 2006.
manufacturing industry fell by 9,000. Consistent with a
softer job market, the total number of actual working
                                                                                                                              Car Registrations
hours per week has fallen by 1.5%. There has been no
annual growth in the number of hours worked per week.                                                   21000
                                                                                                                                                                       20%

                                                                                                        18000                                                          15%
                                                                                                        15000
During the December quarter of 2005, the number of                                                      12000
                                                                                                                                                                       10%

people unemployed fell by 2,000 (or 1.9%) to 78,000.                                                     9000                                                          5%
This can be attributed to a fall of 4.5% and an increase                                                 6000
                                                                                                                                                                       0%
of 0.5% in male and female unemployment respectively                                                     3000
                                                                                                            0                                                          -5%
over the quarter.                                                                                            Jan-04        Jul-04       Jan-05      Jul-05       Jan-06
                                                                                                                    Car Registrations      Annual Average % Change

In the December quarter of 2005, the labour force                                                     Source: Land Transport Safety Authority
participation rate decreased by 0.3 percentage points
[pp] to 67.8%, largely caused by a fall in the female                                                The number of car registrations recorded in New
participation rate (0.6pp↓).                                                                         Zealand has continued to ease in recent months. There
                                                                                                     were 17,604 cars (including both new and ex-overseas
                                                                                                     car types) registered in January 2006, down from 18,139
Overall, the December 2005 HLFS results suggest that                                                 recorded in December 2005, but greater than the 16,428
the New Zealand economy has started to lose                                                          registered in January 2005. The annual average growth
momentum.                                                                                            rate in the number of car registrations recorded in New
                                                                                                     Zealand was 1.8% for the year to January 2006.
   140                                                                                         8.0

   120
                                                                                               7.0
   100

    80                                                                                         6.0

    60                                                                                         5.0
    40
                                                                                               4.0
    20

     0                                                                                         3.0
         4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q-
          00 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05

            NZ Unemployment (000, s.a, LHS)             NZ Unemployment Rate (%, s.a, RHS)

Source: HLFS, Statistics NZ
                  Residential Real Estate Sales                                                       It was clear that a downward trend was developing in the
 12000                                                                                         40%    New Zealand exchange rate market, as the New Zealand
 10000                                                                                         30%    economy slowed in recent months. By the end of the
  8000                                                                                         20%
                                                                                                      month, $1.00 NZ traded against $0.66 US, and the
                                                                                                      trade-weighted index [TWI] settled at 68 points.
  6000                                                                                         10%


  4000                                                                                         0%
                                                                                                                            International Arrivals
  2000                                                                                         -10%

                                                                                                        350000                                                          15%
     0                                                                                         -20%
         Jan-04            Jul-04             Jan-05              Jul-05             Jan-06             300000
                          Dwelling Sales                Annual average % change                                                                                         12%
                                                                                                        250000
Source: Real Estate Institute of New Zealand                                                            200000                                                          9%

                                                                                                        150000                                                          6%
The residential real estate market remained flat in                                                     100000
                                                                                                                                                                        3%
January 2006.       The volume of real estate sales                                                      50000

decreased to 6,360 during the month, which was the                                                           0                                                           0%
                                                                                                              Jan-04       Jul-04       Jan-05       Jul-05        Jan-06
lowest level recorded in January months since 2001.
The median sale price reached a high of $300,000 in                                                                    Visitor No.       Annual average % change

January 2006. The annual average growth rate in the                                                   Source: Statistics New Zealand
volume of real estate sales in New Zealand was -1.7%
                                                                                                      Following a boom in December, New Zealand’s
for the year to January 2006.
                                                                                                      international tourism industry eased in January 2006.
                                                                                                      There was a total of 250,554 short-term overseas
                                     Retail Sales                                                     arrivals to New Zealand during the month, down from a
                                                                                            10%       high of 307,100 recorded in December 2005, but
  6000
                                                                                            8%
                                                                                                      marginally higher than the 249,933 recorded in January
  5000                                                                                                2005. The annual average growth rate in the number of
  4000
                                                                                            6%
                                                                                                      visitor arrivals to New Zealand was 1.3% for the year
                                                                                            4%
                                                                                                      ended January 2006.
  3000

                                                                                            2%
  2000
                                                                                                                               Summary
  1000                                                                                      0%
                                                                                                      Weak labour market results, a cooling down of
         Dec-03           Jun-04            Dec-04              Jun-05           Dec-05
                     NZ Retail sales             Annual average % change
                                                                                                      residential building and the housing markets along with
Source: Business Statistics Section, Statistics New Zealand
                                                                                                      the RBNZ’s adoption of a relatively neutral monetary
                                                                                                      policy, all suggest that New Zealand is entering a period
                                                                                                      of slow economic growth.
In December 2005 for the first time in New Zealand’s
history, monthly retail sales exceeded $6,000 million.
The annual average growth rate in national retail sales                                               According to the latest National Bank [NB] business
was 6.4% for the year to December 2005.                                                               confidence survey, confidence was low in February
                                                                                                      2006.    A net 62% of firms expected that overall
                                                                                                      economic conditions will deteriorate over the coming
                                    Interest Rates
                                                                                                      year. This result was similar to the business opinion
    8.00                                                                                 7.0          expressed in the last survey where a net 61.7% of firms
                                                                                         6.8
    7.80                                                                                 6.6
                                                                                                      were pessimistic. The gloomy mood was spread across
                                                                                         6.4          all New Zealand’s industries. The agriculture sector
    7.60                                                                                 6.2
                                                                                         6.0          was the most affected with a net 80% who were
    7.40                                                                                 5.8
                                                                                         5.6
                                                                                                      pessimistic. The construction sector was the least
    7.20                                                                                 5.4          pessimistic group with a net 54% expecting general
    7.00
                                                                                         5.2
                                                                                         5.0
                                                                                                      business conditions to deteriorate in 12 months’ time.
       1-Feb      7-Feb         10-Feb       15-Feb      20-Feb        23-Feb       28-Feb


                      90-day bills (left)              2-year Govt. bond (right)                      A net 4.4% of firms expected a fall in their own business
                                                                                                      activity, down from a net 2.4% who possessed a similar
Source: Reserve Bank of New Zealand                                                                   negative opinion in December 2005.

New Zealand’s wholesale interest rate market eased                                                    Investment intensions have fallen into negative territory,
during the first two weeks of February 2006, but                                                      with only a net 0.2% of businesses expecting to increase
stabilised afterwards.    By the end of the month 90-day                                              investment in the 12 months ahead. Employment
bill rates stood at 7.51%.                                                                            intensions also declined with a net 8.8% of firms
                                                                                                      expecting to decrease staff levels over the next 12
                                Exchange Rates                                                        months. Firms’ expectations of inflation in 12 months’
     76                                                                              0.74             time have fallen from 3.4% in the NB’s December 2005
     74                                                                              0.72
                                                                                                      confidence survey to 3.1% in the February 2006 survey.
     72                                                                              0.70

     70                                                                              0.68

     68                                                                              0.66

     66                                                                              0.64
                                                                                                      Disclaimer: The Timaru Economic Monitor is a monthly publication
                                                                                                      prepared for the Aoraki Development Trust. Although the monitor
     64                                                                              0.62
      1-Feb       7-Feb        10-Feb       15-Feb     20-Feb       23-Feb       28-Feb               incorporates the most recent information available, many of the figures
                      TWI (Jun 1979=100, left)           USA (mid-rate, right)
                                                                                                      are provisional. Accordingly, no liability can be accepted for the
                                                                                                      accuracy of the material contained herein. Businesses and individuals
Source: Reserve Bank of New Zealand                                                                   are advised to seek professional advice before making major business
                                                                                                      decisions and any decisions based on the information contained in this
                                                                                                      report are made entirely at their own risk.