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.