Timaru District Quarterly economic monitor - March 2018

Overview

Indicator Timaru District Canterbury Region New Zealand
Annual average % change
Gross domestic product
2.2%
2.1%
2.7%
Traffic flow
1.3%
3.0%
2.0%
Residential consents
-25%
-15%
2.5%
Non-residential consents
-35%
-7.2%
2.6%
House prices*
5.7%
-1.5%
9.5%
House sales
-12%
-7.8%
-15%
Guest nights
4.2%
9.2%
3.9%
Retail trade
4.5%
3.5%
4.5%
Car registrations
4.8%
2.7%
4.4%
Commercial vehicle registrations
12%
17%
13%
Jobseeker Support recipients
-5.9%
5.9%
-0.5%
Tourism expenditure
6.1%
12%
9.3%
Level
Unemployment rate
2.8%
3.7%
4.6%
International net migration
279
6,269
67,986
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Timaru District

The Tīmaru District economy grew 2.2% in March 2018 year, according to Infometrics’ provisional GDP estimates. Although only slightly above the average for the Canterbury region (2.1%), economic growth in Tīmaru District was the fastest it has been since 2015.

This pick-up in economic growth has fed through to the labour market. The number of Jobseeker Support recipients has plunged 5.9% since the March 2016 year, compared to a national decline of 0.5%.

With more people in work, more people are spending, which is reflected in higher retail sales. In the March 2018 year, retail trading activity rose 4.5% from a year earlier.

The lift in retail sales coincides with an increase in car and commercial vehicle sales – both indicating that households and businesses are confident enough about their financial positions to expand their vehicle fleets.

Alongside the pick-up in employment, higher dairy prices have also helped bolster spending growth in Tīmaru. Fonterra has raised its farmgate milk price to $6.55/kgMS for the 2017/18 season. This price is 43c/kgMS higher than what farmers received in the previous season and our estimates suggest that the increase has pushed the total dairy payout for Tīmaru District up by $22m.

With a bit of extra cash in their back pocket, farmers are likely to have spent more in the local economy during the past year, particularly on agriculture services and wholesale goods. And we may see even more spending growth driven by dairy farmers in the year to come, with current dairy prices suggesting a farmgate milk price above $7/kgms.

Given strengthening commodity prices, we expect the Timaru economy to hum along at a healthy pace over the year ahead.

Overview of national economy

The prediction by Winston Peters of an economic correction or slowdown, made at the time of last October’s coalition announcement, appears to be coming true. Infometrics’ latest forecasts see New Zealand’s economic growth slowing to 2.4%pa by the end of this year and slipping below 2.0%pa during 2019. A range of factors have combined to drive the slowdown, many of which can be sheeted back to government policy. Weaker population growth will also mitigate some of the demand pressures in the Auckland housing market, but the region’s housing undersupply and affordability issues are likely to remain critical.