Northland Region Quarterly economic monitor - March 2019

Overview

Indicator Northland Region New Zealand
Annual average % change
Gross domestic product
2.0%
2.5%
Traffic flow
1.5%
0.6%
Health Enrolments
2.3%
1.7%
Consumer spending
6.0%
4.1%
Residential consents
-7.5%
10.0%
Non-residential consents
45.3%
7.6%
House prices*
7.4%
1.3%
House sales
-3.6%
1.6%
Guest nights
-1.9%
0.6%
Tourism expenditure
-0.1%
3.3%
Car registrations
-8.9%
-7.6%
Commercial vehicle registrations
-0.4%
-0.07%
Jobseeker Support recipients
5.1%
7.6%
Level
Unemployment rate
5.9%
4.3%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Northland Region

The Northland economy continues to grow, albeit it at a slower rate than a year ago. Its growth is driven by optimistic households, population growth, and a strong agricultural sector. Provisional estimates from Infometrics show 2.0% GDP growth over the 12 months to March 2019 in Northland, slower than the national average of 2.5%.

Northland health enrolments rose 2.3% over the March 2019 year, indicating the population continues to expand. Population growth, coupled with households’ willingness to spend, has driven a 6.0% growth in consumer spending. Consumer confidence, although moderate, remains positive and bodes well for sustained growth.

Northland’s primary sector remains strong, with a strong dairy pay-out supporting local growth. Fonterra has revised their farmgate milk price to between $6.30-6.40/kgMS, with the dairy pay-out for Northland estimated at $568m. Primary sector commodity prices remain high, with meat and forestry products both 5% higher than last year.

However, one of Northland’s other main exports – tourism – has fallen back recently. Guest nights in Northland fell 1.9% over the 12 months to March 2019. The fall was a driven by a 7.0% fall in international visitors to Northland although this was countered by a slight increase (0.9%) in domestic travellers. Total tourism spending fell by 0.1% over the April 2019 year, even as national tourism spending rose 3.3%. Nationally, Chinese tourist arrivals fell 5.5%pa in March, a concern for the tourism sector going forward.

Construction in Northland remains mixed, with non-residential consents rising 45% in Northland over the 12 months to March 2019. The growth was driven largely by a $48m increase in Whangarei over the period. However, residential construction fell 7.5% over the same time. House prices in Northland rose 7.3%, growing at a faster rate than the 1.3% national average.

Northland’s labour market has strengthened over the past two years, with the unemployment rate dropping by 2.5 percentage points to 5.9% in the year to March 2019. A 10% increase in the number of job vacancies also demonstrates the strength of the labour market, although it may be indicative of a growing a mismatch between the skills available in the labour market and those required by employers. Although vacancies have been rising there has been an increase in the number of Jobseeker Support recipients. However, we believe that the increase in Jobseekers is driven by the easing of conditions under which a person can receive a benefit rather than actual labour market conditions.

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.