Manawatu Quarterly economic monitor - March 2019

Overview

Indicator Manawatu New Zealand
Annual average % change
Gross domestic product
2.9%
2.5%
Traffic flow
1.7%
0.6%
Health Enrolments
2.6%
1.7%
Consumer spending
4.9%
4.1%
Residential consents
14.3%
10.0%
Non-residential consents
-16.8%
7.6%
House prices*
10.1%
1.3%
House sales
3.8%
1.6%
Guest nights
6.0%
0.6%
Tourism expenditure
4.8%
3.3%
Car registrations
0.9%
-7.6%
Commercial vehicle registrations
19.0%
-0.07%
Jobseeker Support recipients
8.5%
7.6%
Level
Unemployment rate
5.4%
4.3%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Manawatu

Manawatū region continues to enjoy robust economic growth, supported by a strong primary sector, and solid consumer spending growth. Infometrics’ provisional GDP growth estimate for the Manawatū regional economy was 2.9% in the March 2019 year compared with a national average of 2.5%.

Log prices remained strong in early 2019 underpinned by solid domestic and international demand. Lamb and beef prices are a little down from the peaks seen last year but are, nonetheless, high by historical standards. Fonterra’s farmgate milk price forecast for the 2018/19 dairy season is currently $6.30-$6.40/kgMS. At these prices, Manawatu’s dairy farmers are expected to remain in the black with a forecast $280m pay-out for the 2018/19 season, down $9m on the 2017/18 season but well up on the previous three years.

Electronic card spending on retail purchases in the region has been trending upward since mid-2016. In the March 2019 year, spending grew 4.9% compared with 4.3% nationally. A number of other economic indicators also point to a healthy regional economy. Commercial vehicle registrations grew 19% in the March 2019 year compared with a slight fall nationally. Following a period of sustained growth, car registrations have been stable at around 5,400pa for the past year. Traffic flows in the region grew 1.7% compared with 0.6% nationally. Tourism spending in the region grew 4.8% over the year to April 2019, above national-level growth, while guest nights in the region were well ahead of the national average growing 6.0% compared with just 0.6% growth nationally.

House price inflation in the region has been just over 10%pa for the past year, following a peak of just over 14% in 2016. House sales grew 3.8% in the March 2019 year compared with 1.6% growth nationally. Residential consents in the region grew 14.3% in the March 2019 year due mainly to a very strong final quarter of 2018. In contrast, non-residential consents in the region fell 17% in the March 2019 year, following a period of strong results throughout 2018.

Population growth in the region remains solid, with health enrolments in the area growing 2.6% over the March 2019 year. The region’s unemployment rate is the biggest concern. It has been trending upwards since early 2017 to reach an annual average of 5.4% in the March 2019 year compared with a national average of 4.5%.

Overview of national economy

The economy remains in a holding pattern, with uncertainty increasing the risk of economic paralysis. Global concerns continue to circle, with Brexit, a European slowdown, and the US-China trade war all issues that threaten New Zealand’s export outlook. The Reserve Bank has cut the official cash rate (OCR) to 1.5% in the face of poor business investment, global concerns, and subdued inflation. This leaves the Bank with little ammunition to combat a future unexpected shock. Government spending growth remains slow, restricting the impact of any additional fiscal stimulus. Construction appears to be a bright spot on our outlook, but the labour market presents a more mixed picture, with low unemployment but slowing employment growth.