Manawatu Quarterly economic monitor - September 2018

Overview

Indicator Manawatu New Zealand
Annual average % change
Gross domestic product
3.4%
2.9%
Traffic flow
3.0%
3.9%
Residential consents
14%
5.4%
Non-residential consents
85%
4.9%
House prices*
12%
8.4%
House sales
-1.5%
-0.6%
Guest nights
2.4%
2.7%
Retail trade
5.1%
4.8%
Car registrations
1.0%
-1.7%
Commercial vehicle registrations
12%
2.3%
Jobseeker Support recipients
4.5%
2.2%
Tourism expenditure
4.3%
8.2%
Level
Unemployment rate
5.3%
4.3%
International net migration
724
62,735
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Manawatu

Manawatu is enjoying unprecedented economic growth supported by a strong primary sector, solid consumer spending and population growth. Infometrics provisionally estimates that GDP grew 3.4% in the September 2018 year, well ahead of 2.9% growth nationally.

Both lamb and beef prices remained high in the September quarter, the forestry sector is in a strong position and dairy farmers are expected to remain in the black this year. Fonterra’s farmgate milk price forecast for the 2018/19 dairy season is currently $6.25-$6.50/kgms, above Dairy NZ’s estimates of the breakeven point for the average dairy farmer, which currently sits at $5.50/kgms. Infometrics estimates that the region’s dairy farmers received a $290m payout for the 2017/18 season, an 8.6% increase on last year.

The strong primary sector and rising levels of construction activity are taking commercial vehicle registrations to unprecedented highs, growing 12% in the September 2018 year, ahead of the 2.3% national average. Electronic card spending on retail purchases grew 5.1% in the September 2018 year, compared with the national average of 4.8%. Tourism expenditure grew 4.3%, slightly below 8.2% nationally. Commercial guest nights in the region grew 2.4% to 476,000 in the September 2018 year.

House sales fell slightly in the September 2018 year. They are high by the standards of the past 8 years, but a little off their peak of last year. It is the same story for net international migration which remains strong but is starting to taper off and should take some of the heat out of the housing market.

House price inflation rose again in the September 2018 year. House prices grew 12% following a period of softening growth. However, residential consents remain high which should help moderate price growth going into 2019.

Overview of national economy

We’ve revised up our forecasts of economic growth. It’s not a big change – our growth projection for the year to June 2019 has lifted from 2.7% to 2.9%. But it’s an upward revision and so is at odds with the air of despair being generated by negative business and consumer confidence surveys. Better economic growth in the near term is largely about government spending. Aside from government spending, the other major upward revision is the export outlook. Export prices are at their highest level since 2014 in NZ dollar terms.