Rotorua District Quarterly economic monitor - December 2019

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Overview

Indicator Rotorua District Bay of Plenty Region New Zealand
Annual average % change
Gross domestic product
1.6%
3.1%
2.3%
Traffic flow
2.2%
2.7%
1.7%
Health Enrolments
-0.9%
1.8%
2.3%
Consumer spending
2.6%
4.7%
3.3%
Residential consents
44.9%
7.5%
13.8%
Non-residential consents
43.2%
-11.4%
5.2%
House prices*
13.0%
8.5%
3.6%
House sales
2.4%
2.0%
-1.0%
Tourism expenditure
0.9%
5.1%
3.5%
Car registrations
-11.3%
-6.3%
-8.6%
Commercial vehicle registrations
-11.0%
-3.2%
-6.9%
Jobseeker Support recipients
12.0%
12.6%
10.6%
Level
Unemployment rate
5.4%
4.1%
4.1%
* Annual percentage change (latest quarter compared to a year earlier)

Overview of Rotorua District

The Rotorua economy continues to perform well. Infometrics’ provisional GDP estimate for the district grew 1.7% in the December 2019 year and traffic flows, a useful indicator of economic activity, grew 2.2%. Nationally, consumers remain relatively upbeat about the economy and this is reflected in electronic card spending on retail purchases in the district growing 2.6% in the December 2019 year.

The dairy sector outlook continues to look rosy, with international supply constraints keeping a floor under trade prices and strengthening pay-out expectations for the 2019/20 season.

Based on health enrolments, a proxy for population growth, the district’s population fell 0.9% in the December 2019 year. However, a 45% rise in residential consents, due largely to a strong September 2019 quarter, should provide the capacity for further population growth by helping address the district’s housing shortage. Non-residential consents in the district continue to surge, growing 43% in the December 2019 year.

House price inflation looks to have stabilised for the time being, growing 13% in December 2019. Persistent strength in net migration over the past year is contributing to the housing market’s recovery nationally, aided by declines in mortgage rates throughout 2019.

Tourism spending in Rotorua rose 0.9% to an unprecedented $841 million. 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.

Car registrations and commercial vehicle registrations in Rotorua continue to decline, both falling 11% in the December 2019 year, although there are early signs that the fall in car registrations may be stabilising.

Rotorua’s unemployment rate edged down to 5.4% for the December 2019 year. In contrast, the average number of Jobseeker Support recipients in the district rose 12% in the December 2019 year, on a par with both regional and national trends. 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.