ASB Cantometer Index
EMARGOED UNTIL 0100 23 NOVEMBER 2012
ASB Cantometer index
reveals encouraging but uneven progress in Canterbury
• Decline in housing, employment and consumer spending offset by strong construction activity
• Reconstruction activity expected to underpin 18 percent nationwide lift in residential construction over the coming year
A new composite index designed by ASB to track the Canterbury recovery has revealed that aggregate activity in the region is now above pre-earthquake levels and that construction activity in the region will have a significant impact on a national scale in the coming year.
The ‘ASB Cantometer’ is designed as a simple indicator of activity to give some insights into the recovery progress across different categories of economic activity. The study uses a range of publicly available economic data, which is aggregated into a summary measure. The index has been set to zero in June 2010, such that a positive number represents activity being above pre-earthquake levels.
The first edition of the Cantometer reveals that following the 2010 and 2011 earthquakes, activity in Canterbury fell sharply on a broad-based basis, however, a large proportion of this post-earthquake disruption reversed relatively quickly.
ASB Chief Economist Nick Tuffley: “Over the past year, we have seen recovery in most areas of the Canterbury economy. The November Cantometer Snapshot, at 0.2, implies aggregate activity has returned to pre-earthquake levels. Construction is the big driver of the lift in the Cantometer, with the construction index sitting at 2.2. Strong lifts in building consents and demand for ready-mix-concrete have led this increase.”
According to Mr Tuffley, the remaining indices remain below pre-earthquake levels. “However, over recent months we have seen steady improvement in most indices. In particular, the continued recovery in permanent and long-term migration is an encouraging sign of increased population and demand in the region. Canterbury wage growth has also been stronger than the rest of the country – as to be expected. These price developments signal demand is lifting, even if it is yet to be apparent in some activity indicators.”
The Cantometer indicates construction activity continues to lift, although the flow on to the remainder of the Canterbury economy remains muted during the early days of the rebuild. “We expect Canterbury reconstruction activity to underpin the nationwide lift in residential construction over the coming year, with nationwide activity rising 18 percent over the year to June 2013,” says Mr Tuffley. “However, we continue to expect the RBNZ to remain focused on global uncertainties and the elevated New Zealand dollar, and leave the OCR unchanged at 2.5 percent until September 2013.”
Chart 1: ASB Cantometer
About the Cantometer
The Cantometer is designed to summarise activity in Canterbury. The study takes a range of publically available regional economic data, which is standardised and aggregated into a summary measure. The index has been rebased to zero in June 2010 (the end of the quarter immediately preceding the first earthquake) such that a positive number represents activity being above pre-earthquake levels.
Along with the aggregate Cantometer index, there are five sub categories: Construction, Housing, Employment, Consumer spending and Miscellaneous. These sub-indices will provide some insight into which sectors are driving the rebuild activity at a given point in time.
For most activity the data reference the level of activity. However, when incorporating wages and house prices into the index we believe levels are less informative. Instead the index uses prices relative to the rest of the country. An increase in relative prices is a signal for resources to be reallocated to the Canterbury region.
The historical Cantometer series represented on the charts is a simple average of the complete set of data for each month.
The miscellaneous category includes electricity, car registrations, guest nights and permanent and long-term net migration. A common factor driving these areas will be population growth, and we expect all these indicators to increase as the rebuild gathers momentum.