Business Whanganui Newsletter April, 2015

Welcome to the April edition of our monthly newsletter. Thank you for all of the great feedback its always appreciated. Please see our traffic light system for easy reading. The local economy is still keeping track with the national economy. House sales have remained relatively steady to flat with building consents  showing moderate growth in numbers but values are on a downward trend and new car sales have recovered in March. Electronic Card sales were once again bouyant showing a positive trend very similar to February. The tourism results  are still showing strong signs of recovery with sustained positive growth and a positive medium term outlook for the local economy.

This month’s edition includes ‘Beyond Broadband’, a three-day event to show Whanganui residents the next generation of broadband in action, there is still time to become part of the about us web presence initiative (well worth your while if you are wanting to be found easily in cyberspace) also read about updated seminars being presented by the IRD, and a new opportunity for a preferred contractor for the Wanganui District Council.

If you are interested in more detail or would like a copy of this newsletter as a PDF file or any suggestions/additions please let me know. Join us on our Whanganui and Partners Facebook page to keep up with what is happening on a regular basis we like to be liked as well!

New Zealand Economy

Overall, most businesses were experiencing strong levels of activity, especially those with exposure to tourism, and although pricing intentions remain subdued, margins and profitability remain healthy thanks to internal investment in productivity improvements. 

Activity remains positive…

Trading activity has remained solid across the country.  Most businesses had experienced high levels of sales recently and were expecting this to continue or strengthen going forwards.  Retailers in particular have seen strong sales since the start of the year, partly attributable to lower fuel prices boosting household disposable incomes as well as warmer weather encouraging consumers to make more short trips and holidays.

Construction activity in the Canterbury region has remained steady but growth is expected to slow.  Construction of horizontal infrastructure has been proceeding well but there was a concern that building construction is lagging behind, which could lead to a potential gap when the horizontal projects draw to an end.

Commodity exporters were in general seeing softer demand for their products.  A large element of this was slower growth in China which was leading to weaker demand either directly or via China’s wider influence in global markets.  This is visible in the merchandise trade data where dairy and meat export volumes have fallen in January and February, while forestry export volumes fell through December and January.  Although price outlooks were mixed, it was noted that falling freight prices (as a result of lower fuel costs and surplus shipping availability) and depreciation of the dollar have helped improve returns for New Zealand producers.

…with tourism doing particularly well

The hospitality sector in general and tourism in particular were seeing high levels of activity.  The Chinese government’s move to allow more “free and independent travellers”, who tend to spend more per visit, has been a positive development.

Queenstown has been a major beneficiary of the increase in visitor arrivals, with tourist operators reporting double digit sales growth in the region; this has spilled over into retail operations too.  Tourist destinations in the central and upper North Island have also seen higher visitor numbers, partly attributed to the “Hobbit Effect” as well as cruise ship arrivals and a number of events in Auckland.  Although some tourist destinations had benefitted from the Cricket World Cup, the general perception was that it has had limited impact on tourist numbers and spending overall.  This appears consistent with the February visitor arrivals, which do not show a material increase from cricket-playing nations.  The outlook for tourism is positive, with a high level of bookings for next summer and some businesses already looking forward to the 2017 Lions Tour.

…with rising costs putting margins under pressure

While selling prices were expected to remain fairly steady at current levels, costs appear to be creeping higher, resulting in margin compression for most businesses.  One of the larger cost drivers was labour, with most companies expecting labour costs to increase 2-3% this year, partly as a result of the recent increase in the minimum wage.  This appears consistent with the latest QES survey, which showed growth in average hourly earnings of 2.6% in the year to December.  The depreciation of the NZD was a concern for those with high exposure to imported goods as inputs in their businesses.  Costs related to property, including leases and construction costs, have also risen.

Businesses were protecting margins in a number of ways.  A significant proportion of businesses were focussing investment on improving internal supply chains and productivity, often through the innovative application of technology.  Other more labour-intensive businesses were focussing on maximising the productivity of their employees through increasing the flexibility of the labour pool.  Finally, some businesses, particularly in the retail space, were trying to shift their product mix towards more premium products that offer better margins.  All of these approaches have positive implications for total productivity growth in New Zealand in the near term.  Furthermore, firms’ ability to protect their margins may be part of the reason that corporate tax outturns are tracking ahead of expectations despite relatively muted nominal GDP growth.

What does this mean for the outlook?

Overall, the feedback from businesses is consistent with recent business surveys and data outturns as well as the 2014 Half Year Economic and Fiscal Update (HYEFU), which forecast solid levels of activity but weak pricing over the coming year.  While the Canterbury rebuild remains a major driver of activity, increasingly other regions, especially Auckland, and sectors are taking up the slack.  Solid employment intentions and expectations of wage growth in excess of inflation should support private consumption, with an expanding tourist sector providing further support.

source:Treasury
NZ House sales (Top)

  • 8,803 dwellings sold in March 2015, up 20.3% on March 2014 and up 27.6% on February
  • Highest number of sales in March since 2007, and highest for any month since May 2007
  • National median price of $475,000, up $35,000 on March 2014 and up $45,000 on February
  • A rise of 8.0% in the national median price, from $440,000 in March 2014 to $475,000 in March 2015
  • National median price excluding Auckland is flat compared to February, at $350,000, and up $5,000 compared to March 2014
  • A rise of 13% in Auckland’s median price, from $637,000 in March 2014 to $720,000 in March 2015
  • A new record of 2,267 dwellings sold by auction in March, 604 more than for March 2014
  • Auctions in March 2015 representing more than 25% of total sales for the first time, with almost 50% of Auckland’s sales by auction

REINZ, the most up to date source of real estate data in New Zealand, announced today that there were 8,803 dwelling sales in March 2015, up 20.3% on March 2014 and up 27.6% compared to February. This the highest March sales volume since 2007.
The national median price for March was $475,000, an increase of $35,000 or 8.0% compared to March 2014 and an increase of $45,000 or 10.5% from February 2015. Excluding the impact of the Auckland region, the national median price was flat compared to February at $350,000 and $5,000 (+1.4%) higher compared to March 2014.
Real Estate Institute of New Zealand (REINZ) Chief Executive Colleen Milne says: “March is the strongest sales month of the year, with almost 1,400 more sales than for any of the past 12 months. While the increase in the number of sales is more or less  spread across the country, the movement in the national median price is almost entirely an Auckland effect.”
“Auckland has posted a record number of auction sales in March, with almost one in two sales by auction. Our data shows that on a suburb-by-suburb basis auctions sell for a premium compared to other sales. We also see in the data a noticeable spike in the number of sales over $1 million in Auckland. These two effects explain, at least in part, the jump in the national median and Auckland median prices for March – although the underlying demand pressures remain and supply continues to be restrained by low numbers of new listings.”
“Across the rest of the country, sales volumes and median prices are far better balanced, with a number of regions reporting good sales numbers, good listings and plenty of activity. The national median price, excluding Auckland, has remained at
$350,000 for the past two months, indicating that supply and demand are far more balanced outside of Auckland.”

source REINZ
NZ Retail Card Spend (Top)

Retail card sales for New Zealand have shown good growth over March for the same period last year the only exceptions being apparel and appliances which is also indicative of the relative strength of the dollar and lowere prices. Fuel sales also recorded a negative figure the reason for this is that the graph depicts dollar values and with the sharp decline in the fuel price in recent months values of fuel sales are down considerably this is rapidly changing as fuel prices recover to more sustainable levels.
Source Marketview

NZ New Vehicle Sales (Top)
New Vehicle sales in New Zealand have continued the growth pattern over the previous 12 months which is a good indication that the national economy remains strong. In March  8 075 new vehicles were sold. Which is up on February’s 7 057 as well as Mar 2014 when new 7 992 new vehicles were sold
Source MIA 

Local Economy

Wanganui and Region House sales (Top)
Sales volumes rose 23% compared to March 2014, with sales rising 88% in Levin, 32% in Manawatu Country and 21% in Palmerston North. Compared to February sales volumes rose 2%, with Levin rising 24%, with the rest of the region with either falling or flat sales.

The median price across the region fell $6,000 (-2.6%) compared to February, with prices rising 13% in Levin and 3% in Palmerston North, but falling across the rest of the region. Compared to March 2014 the median price fell $10,000 (-4.2%), with prices rising 10% Manawatu Country and 5% in Feilding, but falling in Wanganui, Levin and Palmerston North.

The number of days to sell improved by 20 days compared to February, from 65 days in February to 45 days in March. Compared to March 2014 the number of days to sell improved by 11 days. Over the past 10 years the median number of days to sell across the Manawatu/Wanganui region in March has averaged 44 days.

REINZ Chief Executive, Colleen Milne noted that “there are more fist home buyers and investors in the market compared to this time last year, although the market overall remains little changed. Listings remain in good supply.”

The median price trend continues to ease as does the volume trend. However, the days to sell trend has moved from falling to easing. The overall trend for the region remains easing

Source MREINZ

Wanganui Card Spend(Top)

The retail card spend in Wanganui was once again positive. This was across all sectors measured with the exception of apparel which was flat and appliances and fuel which are more indicative of the lower prices realised in this sectors.
Top 3 sectors were

  1. Furniture/Flooring (off a low base)
  2. Takeaways
  3. Bars/Cafes/Restaurants

The bottom three sectors were

  1. Fuel (Lower prices)
  2. Apparel (flat)
  3. Appliances(Lower prices)

Source Market View
Card spend comparison by region month growth over previous year

The results for individual councils across the region were mixed this month, with strongest Ruapehu 4.0% increase just moving ahead of Wanganui again at 3.3% increase Manawatu District moving back to 0.1% increase.  Wanganui at a 3.3% increase is on a par with the National growth  of 3.3% and Palmerston North at 1.6% moving lower again. Wanganui was the second to top card spend region when compared to the same period the previous year.
Source Market View

Wanganui New Vehicle Sales (Top)

In March new car sales were up on the previous year with 76 Vehicles sold in March 2015 compared to 60 new vehicles sold in March 2014. Car sales have fluctuated fairly however the medium term trend remains positive.
Source MIA

Building Consents – Wanganui (Top)

The number of Buidling Consents  has still shown growth in March 2015 when compared to a year ago 76 in March 2015 compared to 67 in March 2014.The Value of consents passed has stated to decline as all of the large projects have plateaued and building/construction is in full operation.

The Wanganui District Council building department comes under pressure as the number of consents increases which is good for Wanganui.
Source Wanganui District Council

Tourism (Top)
February 2015 visitor statistics are looking great!  And all the “year end” (YE Feb 15 compared to YE Feb 14) statistics continue to show an upwards trend.   Here are the highlights.

  • Total February guest nights are up 15.7% compared to February 2014
  • International guest nights are up 18% and domestic guest nights are up 15% compared to Feb 2014
  • Total guest nights for the year ended February 2015 are up 5.7% compared to the previous 12 months
  • International guest nights are up 1.6% and domestic guest nights are up 6.8% for the year ended February 2015.
  • Motel guest nights are up 4.9% compared to overall NZ motel guest nights showing an increase of 2.9% for the last 12 months.