Manawatu Quarterly economic monitor - December 2019

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Overview

Indicator Manawatu New Zealand
Annual average % change
Gross domestic product
2.4%
2.3%
Traffic flow
2.0%
1.7%
Health Enrolments
4.4%
2.3%
Consumer spending
3.3%
3.3%
Residential consents
-7.6%
13.8%
Non-residential consents
-37.9%
5.2%
House prices*
17.0%
3.6%
House sales
-3.3%
-1.0%
Tourism expenditure
2.8%
3.5%
Car registrations
-3.5%
-8.6%
Commercial vehicle registrations
17.2%
-6.9%
Jobseeker Support recipients
5.9%
10.6%
Level
Unemployment rate
4.8%
4.1%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Manawatu

The Manawatū regional economy continues to perform well with Infometrics’ provisional GDP estimate for the region growing 2.5% in the December 2019 year, and traffic volumes, a good indicator of economic activity, up 2.0%. Nationally, consumers remain relatively upbeat about the economy and this is reflected in electronic card spending on retail purchases in the Manawatū region increasing 3.3% in the December 2019 year.

Residential consents in the Manawatū region fell 7.6% in the December 2019 year but remain well above their 10-year average. Non-residential consents continued to fall, down 38% in the December 2019 year, following a particularly strong 2018. House sales in the region remain historically high at around 2,000 a year. House sales are being supported by a growing population with health enrolments (a proxy for population growth) up 4.4% in the December 2019 year. The busy housing market, combined with low interest rates and strong consumer confidence, means house price inflation in Manawatū region remains upbeat at 17% in December 2019, well ahead of 3.6% growth nationally.

Tourism spending in the region edged up 2.8% to $491 million in the December 2019 year. It’s likely to be a tough year ahead with the Corona virus expected to hit international visitor numbers, although domestic consumers remain relatively upbeat, and the virus could encourage more Kiwis to take their holidays closer to home.

The region’s unemployment rate fell again to 4.8% for the December 2019 year, reflecting a fall in the national rate to 4.1%. However, the region’s Jobseeker Support recipients continue to rise, growing 5.9% in the December 2019 year compared with 10.6% growth nationally. Our view is that the government’s more lenient stance towards beneficiaries is encouraging more people to claim Jobseeker Support.

Overview of national economy

The economy looks to have turned a corner, at least temporarily, at the end of 2019. Although growth has slowed, some near-term indicators have shown an improvement. Traffic flows, tourism spending, and house prices have all shown renewed growth, and are set to provide a foundation for further growth in 2020. Government spending activity over the medium term also looks to support economic growth, but there remains little in the way of fundamental growth drivers over the next five years. With economic growth shifting down a gear in recent years, headline growth is likely to settle at a softer level. However, a significant risk to growth in 2020 is presented by the COVID-19 outbreak, which will restrain tourism and export activity, and could threaten consumer and business activity if the outbreak continues or spreads to New Zealand.