Download December 2012 - Hawkes Bay Chamber of Commerce

Hawke’s Bay Region
Economic Monitor December 2012
1.0
Introduction
This report provides an analysis and assessment of the current economic situation within the Hawke’s Bay region, economic trends
last year and the economic outlook for the area for this year. Data availability limits the analysis of trends in the report to the
December calendar year; however, some brief comment is included in the report on the limited range of indicator data results
available since then. The base information for the analysis is sourced from a range of organisations including Statistics New
Zealand, the New Zealand Institute of Economic Research in Wellington, Central Government agencies, financial institutions and
other organisations. Growth comparisons with other regions in the country and the nation as a whole are also included in the
analysis where appropriate.
2.0
Trend summary

Last year, as this report indicates, saw a number of welcome significant economic indicator improvements in Hawkes Bay. On
top of this, the traditional peak (summer) season for horticultural and visitor activity over the first quarter of this year has been
positively impacted by the prolonged hot and dry climatic/growing conditions, as well as stronger commodity prices in some
instances. The ‘drought’ conditions have however adversely affected sheep and beef farming activity in the region. In addition,
major concern remains within the rural exporting sector generally over the impacts of the continuing high $NZ. Given all these
factors, the general economic sentiment within Hawkes Bay appears to be one of continuing ‘cautious optimism’ about the
shorter-term performance of the regional and national economies.

The positive economic indicator changes in the region last year include:


Further natural population increase and net internal migration gain

Slightly increased consented new residential development

Increased new building activity in the commercial/industrial sectors

Increased house sales (and housing affordability), motor vehicle registrations and retail sales activity

Relative stability in total visitor night-stays spent in the region and an increased visitor ‘average length of stay’

Continuing strong level of cruise ship based tourism to Hawkes Bay

In March this year, NZ Institute of Economic Research business confidence survey results indicate that the Hawkes Bay
business sector on balance remains slightly optimistic overall about national business conditions over the coming year

March 2013 Napier and Hastings business confidence survey results reinforce the above sentiment

Increased employment and a significant fall in the number of people receiving the unemployment benefit

A significant number of new ‘on the ground’ business and infrastructural developments

Overall real economic/GDP growth for the year to December 2012 of an estimated 2.5%, similar to the national result

Forecast annual growth for the next few years of around 2%.
Downside changes over the past year have included:

Slight overall population decline and continuing significant overall net international migration loss

Fall in total visitor arrivals and night-stays in the region, particularly people staying in commercial visitor accommodation

A fall in the total volume of international cargo handled by the Port of Napier

A decline in the amount of new rural sector building activity

A continuing relatively high unemployment rate, of 7.5%.
840964519
1
3.0
Key Hawke’s Bay region economic indicator levels December 2012
Population June 2012:
155,000
Estimated households/dwellings:
61,830
Nominal Gross Domestic Product (GDP):
$7.4 billion
Annual economic growth:
2.5%
Annual employment:
77,900
Annual employment change:
1%
Annual unemployment:
6,319
Estimated unemployment rate (%):
4.0
7.5
Population
Hawke’s Bay’s population currently stands at an estimated
155,000 and has increased by 2,900 or 1.9% since the 2006
Census year. The region’s population growth track since the
Census shows that this indicator is currently growing close to
the Statistics New Zealand medium growth projection for the
area. This projection indicates that the region’s population is
anticipated to be around the 159,000 mark by Year 2021 and
161,000 in Year 2026.
Fig 1: Hawke’s Bay Population Change Factors 2006-2012
The longer-term trends since 2006 to note in the different
components of the population growth equation in Hawke’s Bay
are as follows:

A 5% fall in births since 2008.

A 10% increase in the annual number of deaths since
2010.

Steadily falling natural population gain (births minus
deaths) since 2008 and overall by 21%.

Continuing overall total net migration (internal and
overseas migration) loss since 2006 of -3,333 with the
peak loss years being 2007, 2008 and 2012 (net migration
loss of over 1200).

An overall total external or overseas net migration loss of
-4222, with the peak loss years being 2008, 2011 and
2012.

An overall net gain of 889 for domestic internal migration
from other parts of New Zealand, during 2006-2012.
840964519
2
5.0
Households/dwellings
The total stock of households/dwellings in Hawke’s Bay
presently stands at an estimated 62,080, compared to
57,900 in June 2006. Since 2006, approximately 4,180 new
residential dwellings have received building consent in the
region, that is, an increase of 7.2%. This compares to the
population gain of 1.9%.
Fig 2: Hawke’s Bay New Residential Dwellings Consented
2007-2012 (December years)
Latest Statistics New Zealand projections indicate an
approximate 5% (3,000) further increase in household
numbers in the region over the 2011-2016 period, under the
halfway Medium-High growth projection scenario of SNZ,
followed by a forecast 12% (7,600) additional growth over
2016-2031. The latter forecast compares to the national
Medium projection of 25% additional household formation
over 2011-2031.
As indicated by Figure 2, new dwelling construction in the
region fell sharply in 2008, recovered noticeably in
2009/2010, dropped back sharply in 2011 but increased
again (by 6%) last year. New houses consented in Jan-Feb
this year were down 10 or 18% on the same period in 2012.
6.0
New building activity
Over the year ended December 2012, a total of some 427 new
dwellings received building consent in Hawke’s Bay, worth a
combined value of $126.7 million. The number of new dwellings
approved during the year and the total value of the approvals
were up 6% and 13.8% respectively on the previous year.
Fig 3a: Hawke’s Bay New Commercial and Industrial Buildings
Consented 2007-2012
Total housing alterations consented increased 15.4% in
numerical terms and 6.4% in value terms.
Total new commercial/industrial building work approved rose
3.4% over the year in volume terms and 5% in value terms, with
increased activity in dollar terms occurring in the office, storage
and industrial building sectors in particular.
The total amount of new commercial and industrial building
activity in the region has fallen considerably overall (-42%) since
2007. Since then, the largest sectors of new building activity
have been industrial, storage, trade/ hospitality services and
offices.
Fig 3b: Hawke’s Bay New Business Related Buildings
Consented 2007-2012
The volume of new rural building work consented fell 33% last
year whilst the value of this work fell 44%. The volume of work
has been falling steadily since 2008. However, last year saw a
significant increased in consented alterations work.
The total number of all new buildings consented in the region
fell 4.3% during the 2012 calendar year, with the associated
total value of the building work increasing though by 13%. The
total number of all consented alterations to buildings rose 10%
last year in volume terms but fell 4% in value terms.
840964519
3
7.0
Other economic indicators
The changes indicated in this section are for the 2012 calendar
year. New dwellings consented rose 6% over the year, compared
to the national increase of 23.9%.
Hawke’s Bay house sales rose 18.5%, compared to the national
gain of 20.8%. The median sale price in the region in December
last year was $253,250, compared to $270,500 in January 2011.
Fig 4: Comparative Hawke’s Bay and New Zealand Economic
Indicator Changes 2011-2012
The latest Massey University Home Mortgage Affordability survey
undertaken in August 2012 indicated that housing affordability in
Hawke’s Bay had improved by almost 8% over the previous year
compared to +5% nationally.
Paymark ‘Pulse Online’ household retail spending figures indicate
a 4.3% increase in the volume of spending in Hawkes Bay
between December 2011 and December 2012, compared to the
national change of 3.6%. At the same time, the total nominal
value of household spending in the region was up 2.7% compared
to 2.3% nationally. The volume of regional spending in January
this year was up 5.8% on January 2012, whilst the value of
spending was up 5%. The comparable figures for the month of
February this year were 1.4% and 1.9%.
According to the results of the December 2012 Westpac
McDermott Miller Consumer Confidence survey, consumers in
Hawke’s Bay/Gisborne were a little more optimistic about shorterterm economic conditions in New Zealand over the coming year,
compared to the situation in December 2011. The March 2013
survey results for the region indicated a continued overall slight
degree of consumer confidence in the region and also a small
overall increase in confidence since the March quarter of 2012.
New motor vehicle registrations in the region rose an estimated
10.4% last year, compared to the 15.8% gain nationally.
Registrations for the Jan-March period this year were up 5.9% on
the same period last year.
8.0
Overall economic growth
Figure 5 indicates the longer-term trend in overall real terms
economic/GDP growth in Hawke’s Bay versus New Zealand,
since 2003.
Fig 5: Hawke’s Bay and New Zealand economic growth since 2003
The base growth data is sourced from the New Zealand Institute
of Economic Research in Wellington. It is noted that where the
graph line lies above the zero x-axis, this indicates positive growth
and vice versa where the graph line lies below the x-axis.
As the graph shows, annual economic growth in the region
peaked at around 8% in 2004, fell sharply the following year, was
negative over 2006/2007 but returned to the positive domain the
following two years. Economic activity in the region then declined
over 2010/2011, with the impact of the major global financial and
economic downturn from around 2009. However, a return to
positive annual growth of an estimated 2.5% was recorded last
year, similar to the national result.
The Institute is currently forecasting underlying annual economic
growth for Hawke’s Bay-Gisborne combined over the coming year
of around 2%, compared to 3% at the national level.
840964519
4
9.0
Visitor/tourism numbers
Total visitor arrival numbers into the Hawke’s Bay region staying
in commercial and private household (VFR) accommodation
totalled approximately 1.1 million for the year ended December
2012, down 2.4% on the previous year. The annual number of
arrivals has fallen overall by about 15% though since the 2005
peak year.
Fig 6a: Total Hawke’s Bay Visitor Numbers 2003-2012
The number of nights spent in the region by visitors staying in
commercial and VFR accommodation totalled 3.5 million last
year, down 0.4% on the previous year. Visitor nights have fallen
overall by about 12% since 2005.
Over the past year, domestic visitors accounted for 73% of total
night-stays in the Hawke’s Bay region and overseas visitors the
balance of 27%.
The average length of stay of all visitors to the region over the
latest calendar year was 3.27 nights, compared to 3.21 nights
for the 2011 year.
Fig 6b: Total Hawke’s Bay Visitor Nights 2003-2012
The total commercial accommodation occupancy rate in
Hawke’s Bay was 31.1% in 2012, compared with the national
figure of 36.2%. The leading accommodation sectors for this
indicator at the regional level were motels 49%, hotels 45% and
backpackers 36%. The holiday parks figure was 13%.
Since 2003, total commercial visitor accommodation capacity in
Hawke’s Bay has increased overall by 11%. Hotel sector
capacity has increased by 30%, motels 14% and back-packers
72%, whilst holiday park capacity has fallen by 9%.
Visitor arrivals into Hawke’s Bay staying in just commercial
accommodation last year were down 8% on the 2011 result,
whilst visitor-nights were down 6.5%. Over January/February
this year, commercial arrival numbers into Hawkes Bay were
down 11% on the same period last year and visitor-nights down
just under 4%.
10.0
Results comparison
Table 1 indicates comparative local economic indicator changes over the 2012 calendar year for the Hawke’s Bay region and its
constituent local authority districts, for the listed indicators.
The population changes are based on the latest available Statistics New Zealand population estimates for the year ending June
2012. The unemployment benefit figures refer to the change between the December quarters of 2011 and 2012.
Table 1: Comparative Hawke’s Bay and TLA District Local Economic Indicator Changes 2012 December year vs 2011 December year
Area
Wairoa District
Napier City
Hastings District
Central HB District
Hawke’s Bay Region
New Zealand
840964519
Population
-2.5
0.0
0.0
-1.1
-0.2
0.6
New housing
consented
-81.3
10.3
20.7
-52.6
6.0
23.9
% Change 2011 – 2012 years
Economic indicators
New nonresidential
Commercial
consented
House sales visitor nights
-6.7
na
-3.8
-2.6
21.3
-8.4
-33.3
15.3
-3.6
-12.8
11.9
-9.2
-22.5
18.5
-6.5
4.1
20.8
-1.8
5
Employment
na
0.5
1.5
na
1.0
0.0
Unemployment
benefit
numbers
-1.2
-7.6
-33.1
-28.3
-20.7
-10.4
11.0
Industry growth
As indicated in Figure 7a, industry GDP in Hawke’s Bay is highest
for commercial business services, primary production, health and
community services, trade/accommodation/hospitality services
and food processing. GDP is lowest for Government
administration, utilities/construction services and transport/
storage/communication services.
Fig 7a: Hawke’s Bay Industry GDP Levels 2012
The table below and to the right details the current annual GDP
contributions of the different industry groups in the region. The
primary sector accounts for approximately 13% of total industry
GDP in the City, processing-manufacturing 18.5%, utility services
and construction 6%, commercial services 34% and public/
community services the balance of 28.5%.
Real GDP growth for Hawke’s Bay industry sectors over the
period 2001-2012, which has included the major economic
downturn period since 2008/2009, has been highest for utility
services/construction combined, Government administration,
health and community services, and the primary production
sector. Growth has been lowest over the period for
transport/storage/communications combined, food processing,
and non-food processing and manufacturing combined.
Since 2008/2009, regional economic activity/GDP has increased
most in primary production, processing/manufacturing other than
food processing, health and community services, and
Government administration. GDP has in fact fallen overall in the
utilities/construction, transport/storage/communications and
business services industries.
Key points to note about the recent and expected performance of
Hawkes Bay’s significant land-based production and exporting
sector are as follows:


Pastoral farming – the Beef and Lamb New Zealand
Economic Service’s ‘Mid-Season Update 2012-13’, as
prepared recently, indicates that North Island East Coast
gross farm revenue is forecast to fall by 21% this year, due
to a combination of lower prices and the dry summer climatic
conditions. Wool revenue is also forecast to fall by 21%, with
cattle revenue falling by 17% due to lower prices and stock
numbers. Total on-farm expenditure is forecast to fall by
around 6%. Farm profit before tax is forecast to fall by some
54%. In terms of dairying, at the end of March this year,
Fonterra announced a 30c per kg milksolid increase in its
forecast payout to dairy farmers to a level of $6.12/kg for a
fully-shared farmer, due to a recovery in global dairy prices.
The latter is primarily due to anticipated milk product
shortages arising from the major drought in NZ.
Nominal
GDP
($m)
% of
total
Rural Production
Food Processing
Other Processing/Manufacturing
Energy/Water/Construction
Retailing/Wholesaling/Hospitality
Transport/Storage/Communications
Commercial/Business Services
Health/Education/Community/Personal
Services
Public Sector Administration
Other Industries
Other1
977
758
608
446
862
496
1186
963
13.2
10.2
8.2
6.0
11.7
6.7
16.0
13.0
310
297
495
4.2
4.0
6.8
Total
7,398
-
Industry
Note: 1
Horticulture – with the very positive climatic and growing
conditions this summer, the HB share of the national pipfruit
harvest is currently forecast to increase by about 5% from
the 2012 level of 293,000 tonnes to some 307,000 tonnes
this year. This represents about 60% of the national crop.
Over the January/February 2013 period, the ANZ Bank’s
$NZ based international commodity price index for pip and
kiwi fruit combined was up close to 10% on the same period
840964519
6
Includes owner-occupied dwellings (imputed rental).
last year. The regional grape harvest is forecast to rise from
the level of 32,800 tonnes last year to in the range 34,00040,000 tonnes this year.

Forestry – the NZ Forest Owners Association reports (March
2013) that forestry exports were a key driver of national
economic growth in NZ over the last quarter of 2012; these
exports rose by 9%. The ‘Woodweek’ publication further
reports that the first quarter of 2013 had provided a strong
start to the year with solid export returns and increases
across the Pacific Rim region in log exports. Export returns
are being assisted by relatively low freight rates, higher log
prices and market growth in both the USA and China.
12.0
Business confidence
The key points to note from the results of the latest New
Zealand Institute of Economic Research quarterly survey of
business opinion for the region (March 2013), are as follows:

The four graphs to the right indicate the confidence
situation for each indicator in the March quarter of each
year. The graphs cover only a selection of the latest
business confidence indicators for the region.

In March this year, Hawke’s Bay businesses on balance
were slightly optimistic about the general business
situation in New Zealand over the next 6-12 months. The
level of confidence was noticeably below that prevailing in
the first quarter of 2012 though.

On balance, HB firms reported in March this year
increasing difficulty in recruiting all their skilled labour
requirements. This situation has been the case since mid
2010. However, at the same time, HB firms, on balance,
were finding it easier to recruit their unskilled labour
needs.

A lack of sales continues to be the dominant factor limiting
business performance in the region. This is followed a
considerable way behind by business access to labour
needs.

Overall, new building investment activity in the region is
expected to fall slightly over the coming year, although to
a much lesser degree than indicated in the business
confidence surveys last year. Business investment in new
plant and machinery over the coming year is anticipated to
remain unchanged over the year.

Fig 8a: General National Business Outlook Next 6 months
Fig 8b: Lack of Sales as a Key Business Performance Limitation
Factor in Hawke’s Bay
Fig 8c: Hawke’s Bay Business Sector Plant/ Machinery Investment
Intentions Next Six Months
Business sector employment increased slightly on balance
over the March quarter this year. However, employment is
anticipated to fall a little over the June 2013 quarter. The
amount of overtime worked during the March 2013 quarter
also rose slightly overall but is expected to drop away
fairly sharply during the June 2013 quarter. Labour
turnover increased marginally overall during the first 3
months of this year but is anticipated to remain unchanged
during the June 2013 quarter.
840964519
7

Average business operating costs continued to increase
noticeably overall at the beginning of this year, with
average selling prices also following suit although to a
lesser degree.

On balance, business profitability again fell significantly
over the first quarter of this year, a situation which has
generally been the case in the region for a long time now.

On balance, the domestic trading activity of the surveyed
businesses in Hawkes Bay was unchanged in the March
quarter this year, the same result as for the December
2012 quarter. This indicator has generally been weak or
falling since around 2008.
13.0
Fig 8d: Hawke’s Bay Business Sector Domestic Trading Situation
Last Three Months
Port of Napier
The graph to the right indicates the longer-term trend in Port of
Napier annual total international export/ import trade volumes
since Year 2006. The base data for the graph is sourced from
Statistics New Zealand.
Fig 9: Port of Napier International Cargo Volumes Handled 2005-2011
Total trade volumes through the Port have increased overall by
25% since 2006. Export cargo volumes have increased by 33%,
whilst import volumes have fallen overall (-7%) although they
are still up significantly (25%) on the 2009 result.
Last year saw a 9% fall in the total international export tonnage
handled at the Port but a 1% rise in the total import tonnage
handled. The total trade tonnage fell by approximately 7%.
In terms of cruise ship tourism to Napier via the Port, the figures
for the 2012/13 season were 62 ship visits and a total of
139,000 passengers and crew. The comparable figures for the
previous year were 71 ship visits and 145,000 passengers and
crew.
840964519
8
14.0
Employment
Total employment in Hawke’s Bay for the 2012 calendar year was
recorded at an annualised 77,900 and was up an estimated 1%
on the previous year. Employment has been relatively stable
overall in the region throughout the period, as indicated in Figure
10a.
Fig 10a: Annualised Hawke’s Bay Employment 2006-2012
Since 2008 and the onset of the latest major international and
domestic economic downturn, industry employment growth in the
region has been strongest for food processing, business services,
health and community services, and Government administration.
Employment decline has occurred most for transport/ storage/
communication services, trade and hospitality services, and nonfood processing and manufacturing.
The leading employing sectors in the region are health and
community services, trade and hospitality services, primary
production and business services.
Fig 10b: Hawke’s Bay industry employment 2012
In December last year, the annualised rate of unemployment in
the region was recorded at 7.5%, compared to 6.9% nationally. At
the same time, total unemployment in the area stood at 6,319.
The number of people receiving the unemployment benefit in
Hawkes Bay in December last year stood at 2,211, compared to
2,787 a year previously, that is, a decline of 21%.
The total number of working-age income tested beneficiaries
stood at 14,322 in December 2012, compared to 14,837 a year
earlier. Males accounted for 39% of the total for December last
year and females the balance of 61%. Maori accounted for 48%
of the total and the age-profile of the benefit recipients comprised
18-24 year-olds 19%, 25-39 years 32%, 40-54 years 30% and 5564 19%.
840964519
9
15.0
Recent developments
A number of positive economic and business developments have been publicly indicated for the Hawke’s Bay region during the past
few months or so, including as follows:
 Agriculture- an exceptional quality year has occurred for horticultural production in Hawkes Bay, given the very positive
summer climatic conditions; HB apple exporter Crasborn Group has partnered with Work and Income NZ in a programme to
prepare young job-seekers for future work; NZ’s largest apple exporter ‘Mr Apple’ has recently purchased a 50% share in local
apple exporter Fern Ridge Produce-Mr Apple employs 180 permanent staff in NZ and also employs a seasonal workforce of up
to 1700 people.
 Processing/Manufacturing – formal opening of the new ABB power electronics engineering facility at the HB Airport; new
timber packaging business, The Pallet Company, has opened a bin, pallet and crate manufacturing plant in Pandora and has
secured key contracts in the pip and stone-fruit sectors; Heinz Wattie in Hastings currently employs some 1900 people in NZ
and exports about 60% of production; Havelock North based high-tech engineering firm Haden and Custance is strengthening
its status as a world leader in the design and manufacture of automated technology-based solutions for the food and dairy
sectors
 Construction – major construction work is continuing in central Napier on a number of sites including the redeveloped HB
Museum and Art Gallery complex, and the new Farmers retail development in Hastings St; new apartment complex to be built
on Napier’s northern Marine Parade area near the historic Soldier’s Club building.
 Retailing – a new split-level retail complex is to replace the old Commercial Building on the corner of Hastings and Dickens St,
Napier; the redevelopment has prompted the temporary or long-term relocation of businesses that have been operating within
or near the Commercial Building; plans are being made for a major redevelopment of the Pak’nSave Tamatea supermarket
and shopping centre.
 Tourism – Napier City Council has recently announced a proposal to construct a new bus terminus facility in the Clive Square
area of central Napier; HB Tourism has recently announced the appointment of a new regional tourism events manager who
will coordinate HB event and conference activity; the annual NZ Horse of the Year Show was held in early March 2013 in
Hastings and attracted an estimated audience of over 70,000 in the course of the 6-day event;
 Transport – recent completion of a new state-of-the-art 1100m2 hangar at HB Airport, to house the Napier Aero Club and
three private hangars; the Port of Napier has recently indicated that the facility is now the North Island’s second largest export
port in volume terms and the country’s fourth largest container terminal.
 Business Services – later last year, Napier-based Fastway Couriers indicated a 10% annual increase in its national sales and
expectations of further growth over the coming year; completion of the Unison Fibre new ultra-fast fibre optic network; HB
based iPad/iPhone games developer Dave Frampton has achieved major downloading success within a relatively short space
of time.
 Community- Hastings District Council is allocating an annual sum of $50,000 towards the costs of planting trees along the
sides of major entry roads into the main urban areas; a new gated retirement housing complex is being proposed for the
Frimley area of Hastings and will comprise some 66 villas; the former HB Powerboard building in central Hastings is being
redeveloped into a new commercial office complex.
840964519
10
16.0
National economic outlook
Each quarter, the NZ Institute of Economic Research produces Table 3: NZIER Consensus forecasts March 2013
updated Consensus Forecasts for shorter-term economic activity
March years
at the national level. The forecasts are a consensus or average
Indicator
2012/13
2013/14
of the views of the different main economic forecasting agencies.
GDP
2.0
2.7
The latest March 2013 forecasts are for:

Private Consumption
Increasing overall economic and consumption growth over
Govt Spending
the next two years.
Residential Investment

Very little Government spending growth over the period.

Major construction sector growth over the next two years, NZ TWI Exchange Rate
particularly with the Christchurch rebuild.
90 Day Bank Bill Rate

Significant and improving business investment growth.

Exchange rate appreciation over the coming year.

Slightly increasing interest rates over the coming year.

Some employment growth over the next two years.

Noticeable private sector wage growth over 2013/2014.
840964519
Other Investment
1.4
2.6
2014/15
2.7
2.5
0.0
0.7
0.7
18.9
24.0
15.5
4.1
6.4
5.9
73.2
75.6
73.2
2.7
2.8
3.6
Employment
-0.7
2.1
1.8
Private Sector Wages
2.6
2.7
3.2
Note: All figures in the table other than for the TWI and 90-Day Bank Bill rate refer to the
‘annual average % change’ in the relevant indicators.
11