Today’s services sector data shows the economic recovery is strong in Auckland but less so in the rest of the country.
The Bank of New Zealand/Business New Zealand Performance of Services Index (PSI) shows an improvement in the services sector overall, but emerging regional differences, says BNZ senior economist Craig Ebert.
In brief, it is Auckland in front; Waikato and other strongly dairy based rural areas improving; Wellington “capped” and Christchurch, of course, facing a serious drop.
That is going to be exacerbated by probable migration trends, Mr Ebert said. (the latest migration figures will be released tomorrow morning).
Other, larger countries commonly have a multi-speed economy – he cited Australia’s western mining boom and the more circumspect growth elsewhere, and of course the large disparities within the United States, let alone the EU’s economic (and possible future political) splits between the extremes of Germany and Greece.
“In New Zealand, even before the earthquakes in Christchurch we were seeing signs of the Auckland economy holding up much better than most and beginning to come out of hibernation sooner. We believe this was partly driven by internal migration toward the relative safety that Auckland represented, especially during the recession.
“Call it a liquidity premium. We are yet to see this confirmed by any up to date population data. But we’ll keep this in mind when looking.”
The regional variation is particularly strong in the housing data – QVNZ’s index shows house prices in Auckland are now on average only a few points below the 2007 peak.
“Prices in Hamilton and Tauranga are down more than 10% (and so more than 20% in inflation-adjusted terms). Wellington (and Dunedin) nominal home prices have slipped somewhere between 5-10% from peak. For Christchurch it has become just too difficult to tell, with severely disrupted/destructed supply offset by withered demand.”