Timaru District Quarterly economic monitor - June 2017

Overview

Indicator Timaru District Canterbury Region New Zealand
Annual average % change
Gross domestic product
1.3%
0.8%
2.8%
Traffic flow
1.7%
1.7%
3.3%
Residential consents
-19%
-20%
4.7%
Non-residential consents
-22%
-25%
1.6%
House prices*
9.3%
0.3%
6.7%
House sales
-4.3%
-8.6%
-14%
Guest nights
-3.7%
-0.6%
3.7%
Retail trade
1.8%
1.5%
3.6%
Car registrations
16%
9.9%
9.5%
Commercial vehicle registrations
15%
16%
20%
Jobseeker Support recipients
2.1%
12%
1.2%
Tourism expenditure
4.6%
3.5%
5.9%
Level
Unemployment rate
3.4%
3.9%
5.0%
International net migration
252
6,697
72,297
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Timaru District

Timaru’s economy stabilised further in the June quarter. Infometrics’ provisional estimate of GDP showed economic growth of 1.3% over the June year, compared to no growth the previous year. Traffic flows in Timaru rose 1.7% during the June 2017 year. A key source of stabilisation has been better returns in the dairy sector, at a time when other agricultural returns are healthy. Although building consents tracked down, improvements were seen across a range of spending indicators, as well as in measures of employment.

Returns in Timaru’s dairy sector have risen significantly over the past year. Infometrics’ estimates show the dairy payout was $150m (before dividends) in the 2016/17 season, up $55m from the previous year. Moreover, Fonterra’s recent increase in its farmgate milk price forecast from $6.50 to $6.75/kgms for the 2017/18 season bodes well for farmers. Other parts of Timaru’s primary sector, particularly horticulture, fruit, forestry, and seafood are also enjoying good returns. Nevertheless, a concern at present is that sodden soil in some parts of the district could hamper spring grass growth and affect horticultural plantings.

Although the average number of people receiving Jobseeker Support was still up 2.1% across the June year, there were 17 fewer people receiving the support during the June quarter than a year ago. One factor pushing employment conditions in the right direction has been growth in food processing in Timaru District. For example, Fonterra’s new Clandeboye mozzarella factory requires 100 new workers, while Silver Fern Farms is also expanding employment at its Pareora plant following recent investments. The fishing industry is also adding to employment, with Sanford’s having created an extra 100 jobs over the past year.

These trends in the primary sector appear to have renewed confidence to make vehicle purchases. In the June year, car registrations climbed 16% to a record level, while commercial vehicle registrations rose 15% to their highest level in nine years. Retail spending was up 1.8% in the June year, with retail spending during the June quarter totalling $139m, compared to $134m a year ago.

Visitor spending over the June year was a record $211m, compared with $201m the previous year. Although commercial guest nights eased, private accommodation appears to have grown rapidly.

Overview of national economy

The ratio of New Zealand’s export prices relative to the cost of imports is close to historic highs, thanks to soaring demand for many of the country’s key export commodities and a butter boom. With service sector and construction activity also elevated, there remains significant momentum left in the New Zealand economy. But forecasts of interest rate increases have been pushed out as domestic inflation pressures aren't lifting as fast as had been anticipated and the high New Zealand dollar is subduing tradeables inflation.