CHRISTCHURCH AND CANTERBURY QUARTERLY ECONOMIC REPORT SEPTEMBER 2014 QUARTER

CHRISTCHURCH AND CANTERBURY QUARTERLY ECONOMIC REPORT SEPTEMBER 214 QUARTER Prepared November 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 2 POSITIVE RESULTS IN THIRD QUARTER OF 214 The September 214 indicators have shown that the Christchurch and Canterbury economies are continuing to perform strongly. Estimated Gross Domestic product continues to increase (June 214 quarter), with a slight upturn in the growth rate. This continues to be largely driven by the booming construction sector, although between the June 213 and 214 quarters the only sector in Canterbury that was estimated to have retracted was Mining. This shows the strength of the underlying economy which will help keep the economy strong beyond the rebuild. Labour market measures confirm this underlying sector strength, with only two industry groups (Agriculture, Forestry, and Fishing and Mining; and Education and Training) seeing a decrease in employment over the past year. While the unemployment rate increased slightly in both Christchurch and Canterbury, it is still at a very low level and engagement is high in the labour market with strong participation rates. The December quarter should continue to see good results for most indicators for the city and region. As the rebuild nears its peak we expect to see the growth rate in gross domestic product continue to decline, with output being at a very high level. ACTIVITY INDICATORS Gross Domestic Product It is estimated (by Infometrics Ltd) that Gross Domestic Product in Christchurch city increased by 5.6 percent in the year ending June 214. This is a pick-up in the growth rate, having seen falls the previous four quarters. As the rebuild nears its peak the growth rate is expected to fall, with GDP sitting at a very high level. Gross Domestic Product- (Annual Average Percent Change) Source: Statistics, Infometrics, CDC 1.% 8.% The Construction sector experienced the biggest increase between the years ending June 213 and June 214, growing by a further estimated 14.5 percent. 6.% 4.% Health Care and Social Assistance continued with its increase, growing by an estimated 8. percent. This sector is expected to see strong growth in the long-term as the population ages and increasingly draws on these types of services. Other sectors to experience strong growth include Agriculture, Forestry and Fishing (7.4 percent), Retail Trade (7. percent), Finance and Insurance (7. percent), Accommodation, Cafes and Restaurants (6.5 percent), and Manufacturing (5.4 percent). 2.%.% -2.% -4.% -6.% Jun 7 Dec 7 Jun 8 Dec 8 Jun 9 Dec 9 Jun 1 Dec 1 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Retail Trade (Change in Seasonally Adjusted Retail Sales from previous period) Source: CDC, Statistics 1.% 8.% 6.% 4.% 2.% Retail Trade Christchurch Canterbury Retail Trade in Canterbury remains strong, reflecting both the confidence in the economy, as well as continuing sending on replacements and new purchases following insurance payments and during the residential repair and rebuild period. Seasonally-adjusted retail sales in Canterbury increased by 2.7 percent in the June 214 quarter, from the March 214 quarter, the fourth consecutive quarter of increases..% -2.% -4.% Jun 7 Dec 7 Jun 8 Dec 8 Jun 9 Dec 9 Jun 1 Dec 1 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 The Christchurch Retail Trade Indicator showed that compared to the previous quarter, retail sales grew by 1.3 percent and hospitality by 1.7 percent (seasonally adjusted). -6.% -8.% -1.% Canterbury Retail numbers are expected to remain high throughout the rebuild period as workers in the city and region are boosted by strong construction jobs, and people continuing to purchases goods and materials for their homes and workplaces. NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 3 Commodity Exports and Imports Exports from Christchurch are showing a lot of movement at the moment. This is a traditionally very volatile series, due to production, ships in port, commodity prices (numbers are reported in dollar terms) and the number of days in a month. There were several spikes in the series in 211 and 212, potentially related to measurement practices. Note additionally, these numbers do not measure exports in the true sense, but cargo moving in and out of a port. The aircraft and parts thereof has been backed out of the series as it previously distorted the overall trend. In July to September 214 the most exported commodity from Christchurch s two ports was dairy produce (and eggs and honey), at $434 million, followed by machinery and mechanical appliances at $243 million and meat and edible meat offal at $153 million. Imports into Christchurch ports have been increasing strongly recently, although this too is a volatile series. Not all imports are consumed in Christchurch, some are distributed around the rest of the country, and not all imported goods consumed in Christchurch arrive through Christchurch ports. Between July 214 and September 214 Christchurch received on average 1.1 percent of s total imports (up from 8.1 percent over the same period in 21). The most imported commodity into Christchurch in June to August 214 was fuels and oil at $282 million, followed by machinery and mechanical appliances and parts, at $195 million. Some of this machinery is likely to be rebuild related. There was $38 million in iron and steel and iron and steel articles, up from $27 million in over this period in 213 and $25 million in 21. Commodity Exports (Christchurch Airport and Lyttelton, fob NZ$m and proportion of NZ) Source: CDC, Statistics NZ 1,4 3.% Monthly Cargo Exports $m 1,2 1, 8 6 4 2 25.% 2.% 15.% 1.% 5.%.% Commodity Imports (Christchurch Airport and Lyttelton, cif NZ$m and proportion of NZ) Source: CDC, Statistics NZ 6 12.% 5 1.% 4 3 2 8.% 6.% 4.% 1 2.%.% Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan 214 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan 214 Jul 214 Proportion of NZ Christchurch Total ($m) Christchurch excluding Aircraft ($m) Proportion of NZ (RHS) Monthly Cargo Exports $m Proportion of NZ Christchurch Total ($m) Proportion of NZ (RHS) NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 4 World Price and NZ Price Index The world price index fell to 293.2 in September 214, down from 314.7 in June, a fall of 6.8 percent. The commodities which saw the biggest prices decreases, comparing September to June, were dairy (down 23.7 percent) and horticultural projects (down 5.2 percent). The price of meat, skins and wool and Aluminium both increased, by 11.3 percent and 8.1 percent, respectively. With a depreciation in the dollar between the three months to March 214 and the three months to June 214, the dollar price index fell by only 2.3 percent. With a lower valued dollar, when exports revenue is converted back into dollars exporters are receiving more, softening the fall in commodity prices. In NZD terms, dairy products fell by 19.3 percent. World Price Index (World Price Indices, July 1986=1) Source: ANZ Commodity Price Index 45. 4. 35. 3. 25. 2. 15. 1. 5. Dollar Price Index (NZD Price Indices, July 1986=1) Source: ANZ Commodity Price Index 3. 25. 2. 15. 1. 5.. Jan 7 Jul 7 Jan 8 Jul 8 Jan 9 Jul 9 Jan 1 Jul 1 Jul 11 Jul 12 Jul 13 Jul 14. Jan 7 Jul 7 Jan 8 Jul 8 Jan 9 Jul 9 Jan 1 Jul 1 Jul 11 Jul 12 Jul 13 Jul 14 World Price Index Meat, Skins and Wool Dollar Index Meat, Skins and Wool Dairy Products Forestry Products Dairy Products Forestry Products Electricity Consumption Electricity Consumption is an indicator of the level of activity in a region, and would be expected to increase if construction increased dramatically. However, it can also be heavily influenced by factors such as the weather. Electricity consumption in Christchurch grew in the June 214 quarter to 182.7 KWh per week, compared to 173.5 KWh per week in June 213, an increase of 5.3 percent. Total levels were up significantly on the previous quarter, potentially due to colder weather in the autumn/winter months In, the amount of electricity consumption over the quarter fell, from 2,194. KWh per week, to 2,15.8 KWh per week, a 2. percent fall between June 213 and June 214. Electrcity Consumption Growth KWh per week, percentage change from same quarter previous year Source: Infometrics Ltd, CDC 15.% 1.% 5.%.% -5.% -1.% Jun 2 Dec 2 Jun 3 Dec 3 Jun 4 Dec 4 Jun 5 Dec 5 Jun 6 Dec 6 Jun 7 Dec 7 Jun 8 Dec 8 Jun 9 Dec 9 Jun 1 Dec 1 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14-15.% -2.% Christchurch NOVEMBER 214

5 SEPTEMBER 214 QUARTERLY ECONOMIC REPORT Median Sale Price for Housing In September 214, the median sale price for Christchurch was $425,4, following a similar $421,5 in August and up from a recent low of $47, in July. These numbers have not been seasonally adjusted and are prone to significant variation as they are solely based on houses sold. The prices of houses in the city appear to be still strong, although are not increasing as consistently or steeply as previously. House prices in in Canterbury/Westland are also sitting at a high level, although slightly behind Christchurch. In September 214 the median house price was $413,, an increase of 1.1 percent from September 213 ($375,). Nationally, houses prices fell back slightly, from $427,25 in June 214 to $42, in September. Median Sale Price (monthly median sale price of dwellings) Source: Real Estate Institute of Inc. Median sale price $ 5 45 4 35 3 25 2 15 1 5 Jan 5 Jul 5 Jan 6 Jul 6 Jan 7 Jul 7 Jan 8 Jul 8 Jan 9 Jul 9 Jan 1 Jul 1 Jul 11 Jul 12 Jul 13 Jul 14 House Sales (monthly number of house sales) Source: Real Estate Institute Inc. Christchurch Number of Houses Sold Number of sales 12 1 8 6 4 2 Jan 5 Jul 5 Jan 6 Jul 6 Jan 7 Jul 7 Jan 8 Jul 8 Jan 9 Jul 9 Jan 1 Jul 1 Jul 11 Jul 12 Jul 13 Jul 14 12 1 8 6 4 2 Number of sales Christchurch Real estate activity has dropped back slightly, with 1,513 houses sold in the September quarter in Christchurch, down from 1,545 houses sold over the same period in 213. Canterbury/Westland saw a similar trend, with 2,74 houses sold between July and September 214, down from 2,466 over the same period the previous year. In, around 17,285 were sold in the 214 June quarter, down slightly from 2,145 in the 213 September quarter. There is still significant pressure on house prices in Christchurch and Canterbury as settlements are made, as well as with increased migration. As newly built houses continue to become available, some of the upward pressure on prices should continue to ease. Christchurch (RHS) Residential Rent Private mean residential weekly rent, as measured by the Ministry of Business, Innovation and Employment, shows that since 211 private rents in Christchurch have been growing strongly. In September 214, rents were at $429.1, well above the national mean rent of $377.1. However, rents in Christchurch appear to have levelled off over the last few months. Historically Christchurch rents have been below the national average. The increase in residential rent has been driven by a supply shortage causing increased pressure on the Christchurch housing market. This is due to several factors; damaged housing stock, increased migration, and the need for temporary accommodation as home repairs are undertaken. As residential repairs and rebuilds progress towards completion this pressure should lessen through time. Mean Residential Weekly Rent Private Sector Landlords, mean residential weekly rent $ Source: Ministry of Business, Innovation and Employment 5. 45. 4. 35. 3. 25. 2. 15. 1. 5.. Jan 5 Jul 5 Jan 6 Jul 6 Jan 7 Jul 7 Jan 8 Jul 8 Jan 9 Jul 9 Jan 1 Jul 1 Jul 11 Jul 12 Jul 13 Jul 14 Christchurch NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 6 CONFIDENCE AND GENERAL BUSINESS PERFORMANCE Firm Profitability The profitability of South Island firms, as measured by the NZIER in the Quarterly Survey of Business Opinion, continues to show more firms have experienced decreased profitability than increased over the past three months (the September quarter), with a net 1 percent of firms reporting their profitability to have fallen. This follows a fall the previous period. This is a similar performance to the rest of the country. Firms are however more optimistic about the three months ahead, with a net 6 percent expecting their profitability to improve, up from only 2 percent the previous quarter. is somewhat more optimistic with a net 12 percent expecting a growth in profitability. As the rebuild continues to gain momentum, and its effects are more widely observed across the economy, the confidence of firms, and their profitability, should improve. Profitability of Firms- Past three months (Net percent of firms reporting higher profits) Source: NZIER Quarterly Survey of Business Opinion Net % of firms reporting higher profits past 3 months 3 2 1-1 -2-3 -4-5 -6 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 13 Mar 14 Profitability of Firms- Next three months (Net percent of firms expecting higher profits) Source: NZIER Quarterly Survey of Business Opinion Net % of firms expecting higher profit next 3 months 3 2 1-1 -2-3 -4-5 -6 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 13 Mar 14 South Island South Island WORKFORCE Employment and Unemployment The labour force in Canterbury continued to show strength in the September 214 quarter. The unemployment rate remains relatively low at 3.2 percent (numbers not seasonally adjusted). This is an increase from 2.8 percent in the June quarter. The regional increase in the unemployment rate was driven by a small decrease in employment and occurred despite a small fall in the estimated working age population. The participation increased slightly to 72.4 percent over the population over 15 either in work or looking for work. Christchurch saw only a small increase in the unemployment rate, from 3.2 percent to 3.3 percent. The city also saw a small decrease in the number of people employed and working age population but the labour force participation rate increased further to 73.5 percent. The national (unadjusted) unemployment rate is 5.4 percent, unchanged from the previous quarter. Employment (annual percent change) Source: Statistics NZ Household Labour Force Survey, CDC Annual percent change in employment 2.% 15.% 1.% 5.%.% -5.% -1.% -15.% Jun Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Christchurch Canterbury Jun 13 Jun 14 NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 7 Unemployment Rate (percent of labour force unemployed) Source: Statistics NZ Household Labour Force Survey Percent of labour force unemployed 9. 8. 7. 6. 5. 4. 3. 2. 1.. Jun Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Christchurch Canterbury Jun 13 Jun 14 In Canterbury, the industry groups which saw the biggest growth in employment between the September 213 and September 214 quarters were Rental, Hiring and Real Estate Services (up 78 percent); Construction (up 38 percent); Public Administration and Safety (27 percent); Retail Trade and Accommodation and Food Services (15 percent); Financial and Insurance Services( 15 percent). Some of these are off low bases, such as rental, hiring and real estate services. Falls in employment were only seen agriculture; and education and training. Participation in formal study for those employed in Canterbury has increased to 25,9 in the September quarter, from 24,7 in the June quarter. For those not in the labour force there has been a decrease from 14,1 to 1,9 over the same period (for those unemployed the data was supressed last quarter). By supplementing work with training people can be better placed to move between areas when skill demands change. Labour Force Participation Rate (percent of working age population in the labour force) Source: Statistics NZ Household Labour Force Survey Percent of people aged 15+ in labour force 76. 74. 72. 7. 68. 66. 64. 62. 6. Jun Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Christchurch Canterbury Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Jun 13 Jun 14 Working Age Population (annual percent change) Source: Statistics NZ Household Labour Force Survey, CDC Working aged population- 15 years and over 14.% 12.% 1.% 8.% 6.% 4.% 2.%.% -2.% -4.% -6.% -8.% Jun Jun 1 Jun 2 Jun 3 Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Christchurch Canterbury Jun 13 Jun 14 Earnings Average weekly earnings in Canterbury, as measured in the New Zealand Employment and Earnings survey, fell slightly in the September quarter, decreasing to $895 for employees per week, down from $92 in June 214, a decrease of.7 percent. The was made up of ordinary time weekly earnings of $873 (down from $88) and overtime weekly earnings of $23 (up from $21), and follows a.7 percent increase the previous quarter. The gap between Canterbury and has consequently increased to $39, with a smaller fall in wages across the country. The gap is still lower than it has been historically. In the June 214 quarter, Canterbury workers worked slightly fewer hours than. Ordinary time hours were down from 32.5 to 31.9 and overtime hours took a slight fall (.72 to.68). These changes are reflected in the earnings statistics, with estimated earnings per hour (total hours worked), increasing between June and September 214. Earnings (Average Weekly Earnings- Employees) Source: Statistics Employment and Earnings Survey 1 Average weekly earnings for employees $ 9 8 7 6 5 4 3 2 1 Mar Mar 1 Mar 2 Mar 3 Mar 4 Canterbury Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 13 Mar 14 NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 8 Christchurch International Migration (Permanent and Long Term Migration, Arrivals and Departures) Source: Statistics, CDC Number of People 12 1 8 6 4 2-2 -4-6 -8 Jan 8 May 8 Sep 8 Jan 9 May 9 Sep 9 Jan 1 Net- Christchurch May 1 Sep 1 Departures- Christchurch Ease of Finding Labour May 11 Sep 11 May 12 Sep 12 May 13 Sep 13 Arrivals- Christchurch During the recession accessing both skilled and unskilled labour became easier. This was reasonably short lived, especially for skilled workers. Both the economic recovery, population loss from the earthquakes, and demand for rebuild related workers has made skilled labour again more difficult to access. In the September 214 quarter, a net 35 percent of South Island firms surveyed by NZIER claimed to have found skilled labour more difficult to source (seasonally adjusted). This difficulty is expected to continue with increasing demand for workers which will in turn drive labour costs up in certain sectors. Similarly, finding unskilled labour is difficult, with a net 21 percent of firms in the September 214 quarter finding it tougher than the previous quarter. This too is expected to intensify with the rebuild. Across the country, firms are finding both skilled and unskilled labour harder to source (a net 26 percent and net 7 percent, respectively). In particular the Upper North Island is struggling to find skilled workers. This tightness across the country will make it more difficult to attract workers to the region to assist with the rebuild. May 14 Difficulty Finding Skilled Labour (Net percent of firms reporting decreased difficulty finding skilled labour) Source: NZIER Quarterly Survey of Business Opinion 6 Net % of firms- finding skilled labour more difficult Difficulty Finding Unskilled Labour (Net percent of firms reporting decreased difficulty finding unskilled labour Source: NZIER Quarterly Survey of Business Opinion Net % of firms-finding a unkilled labour more difficult Sep 14 4 2-2 -4-6 -8 8 6 4 2-2 -4-6 International Migration Following the earthquakes, migration (international permanent and long term) fell to both Canterbury and. Between March 211 and May 212, Canterbury lost a net 4,525 people overseas, an average of 32 more people leaving than arriving each month. This trend has now reversed. In the three months ending September 214, a net 1,252 people arrived in Christchurch, a similar level to the 1,29 the previous year. In Canterbury a net 1,572 decided to call the region home, up from 1546 the previous year. as a whole saw a strong growth in migration with a net 15,965 new arrivals, compared with 8889 the previous year. There has been significant movement into Auckland in particular. The growth is being driven by a strengthening economy, a weakening Australian economy and the opportunities being driven by the Canterbury rebuild. More people in the city will help prevent labour shortages and allow other activity to grow such as retail trade, but continues to put pressure on house prices. Mar Mar Mar 1 Mar 1 Mar 2 Mar 2 Mar 3 Mar 3 Mar 4 South Island Mar 4 Mar 5 Mar 5 South Island Mar 6 Mar 6 Mar 7 Mar 7 Mar 8 Mar 8 Mar 9 Mar 9 Mar 1 Mar 1 Mar 11 Mar 11 Mar 12 Mar 12 Mar 13 Mar 13 Mar 14 Mar 14 NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 9 CDC Labour Market Spider Graph This graph examines various labour market measures for the Canterbury region in the September quarter of 214, comparing them to a reference band which is set at plus or minus five percent of the level. The previous level for Canterbury (the June 214 quarter) is shown by the dotted line. From this chart we can see that most measures are sitting beyond the reference but are relatively stable. Migration and finding skilled labour is more variable, with migration seeing strong numbers this quarter, driven by growth into Auckland. Notes: Weekly Earnings Hours Worked Migration Rates % School Leavers L3 QEX - QEX - Average Weekly Earnings (Employees) by Regional Council and Sex (Qrtly-Mar/Jun/Sep/Dec) QEX - Average Weekly Paid Hours (Employees) by Regional Council and Sex (Qrtly-Mar/Jun/Sep/Dec) ITM PLT Migration Net. The Rate is calculated as the expected proportion of migration contribution Canterbury would have given its population base. i.e It is expected that Canterbury has 12.6% of National PLT. Education Counts - School Leavers by Highest Attainment and Regional Council 213 Jobs Online Difficulty finding labour Department of Labour Skilled Job Vacancy Index May 27 = 1 NZIER QSBO South Island Seasonally adjusted figures. Net finding more difficult than previous three months The graph only extends to 25% above or below the rate. Any figure outside this range is shown graphed at the limit. Canterbury Labour Market - Q3 214 Source: Statistics, Education Counts, NZIER, Department of Labour Jobs Online(Skilled Index) (Cant=28) (NZ=118) Unemployment (Cant=3.2%) (NZ=5.4%) Participation Rate (% of Working Age Population Employed) (Cant=72.4%) (NZ=68.6%) Harder to Find Unskilled Labour (Cant=21%) (NZ=7%) Weekly Earnings (Cant=$895.2) (NZ=$933.9) Harder to Find Skilled Labour (Cant=35%) (NZ= 26%) Hours Worked (Cant=32.54 hrs) (NZ=32.59) % School Leavers L3 (Cant=48.6%) (NZ=47.1%) Migration Rates (Cant=+1572) (Total NZ=+15965) (Green Band(12.6% of NZ Total)=+212) Reference Band (+/- 5% of ) Canterbury Labour Market Indicators Previous Period NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 1 Performance of Manufacturing The BNZ- Business NZ Performance of Manufacturing index (PMI) saw further expansion in the Canterbury region in September 214, with a level of 55.9. Anything above 5 represents expansion. This is the ninth consecutive month of expansion in the region. Orders for rebuild related products should be assisting Canterbury manufacturers and helping drive these results upwards. Note these numbers are not seasonally adjusted. Across the country the (seasonally adjusted) Performance of Manufacturing index also show expansion at 58.1 (unadjusted 57.9). Production, employment, new orders, finished stocks and deliveries all showed expansion. Performance of Manufacturing Index (seas unadj) (value > 5 means expansion, <5 contraction) Source: BNZ- Business NZ Performance of Manufactuirng Index 8. 7. 6. 5. 4. 3. 2. Aug 2 Feb 3 Aug 3 Feb 4 Aug 4 Feb 5 Aug 5 Feb 6 Aug 6 Feb 7 Aug 7 Feb 8 Aug 8 Feb 9 Aug 9 Feb 1 Aug 1 Feb 11 Aug 11 Feb 12 Aug 12 Feb 13 Aug 13 Feb 14 Aug 14 Canterbury Performance of Services The BNZ- Business NZ Performance of Services survey, provides an estimate of the level of activity in the services sector. In September 214, Canterbury/Westland showed expansion with a figure of 58. (anything over 5 indicates expansion). This if the seventh continuous month of expansion. The services industry in the region has been relatively variable the past few years, especially in Canterbury. s industry has continued to expand, at 58. (seasonally adjusted, 57.6 no seasonal adjustment). Some areas of the services sector were significantly impacted by the earthquakes, through demand for construction related services and the loss of premises. Many of these have shown signs of recovery, with new premises becoming available and increased demand from other growing sectors. Therefore, the industry can be expected to show volatility as the rebuild itself will be variable in its demand for service provision. Performance of Services Index (seas unadj) (value > 5 means expansion, <5 contraction) Source: BNZ- Business NZ Performance of Servics Index 7. 6. 5. 4. 3. 2. 1.. Apr 7 Aug 7 Dec 7 Apr 8 Aug 8 Dec 8 Apr 9 Aug 9 Dec 9 Apr 1 Aug 1 Dec 1 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Canterbury/Westland Aug 13 Dec 13 Apr 14 Aug 14 NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 11 OVERVIEW OF THE REGION S ECONOMY Population Estimates Source: Statistics, CDC Subnational population estimates 4 35 3 25 2 15 1 5 Waimakariri district Christchurch city 21 212 214 Selwyn district Rest of Canterbury Population The Statistics NZ subnational population estimates showed that the estimated resident population for Christchurch had fallen 21,2 (5.6%) between 21 and 212. The 214 population estimates indicate that some of the population loss has been recovered with the city reaching 362, people. Selwyn and Waimakariri continue to see strong growth. Selwyn was the fastest growing territorial authority in the country, growing by 11.3% between 212 and 214 (5, people), and Waimakariri grew by 7.7 percent (3,9 people). This means that the Greater Christchurch area, including the three territorial authorities, grew by 15,8 people (3.5 percent) over the period. The Canterbury region overall grew by an estimated 3.3 percent (18,3 people) between 212 and 214. Structure The structure of the Canterbury economy is similar to the national economy. Statistics provides an annual estimate of employees by sector. The biggest employers in the city are Health Care and Social Assistance and Manufacturing, employing around 12.5 percent and 11.6 percent of all Christchurch employees respectively. This is followed by Construction (11.3 percent) and Retail Trade (1.3 percent). Construction has grown significantly over the past few years. Employees by Sector 214 Proportion of all employees in each sector Source: Statistics NZ, CDC S Other Services R Arts and Recreation Services Q Health Care and Social Assistance P Education and Training O Public Administration and Safety N Administrative and Support Services M Professional, Scientific and Technical Services L Rental, Hiring and Real Estate Services K Financial and Insurance Services J Information Media and Telecommunications I Transport, Postal and Warehousing H Accommodation and Food Services G Retail Trade F Wholesale Trade E Construction D Electricity, Gas, Water and Waste Services C Manufacturing B Mining A Agriculture, Forestry and Fishing.% 5.% 1.% 15.% Proportion of total employees Canterbury Region Christchurch City NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 12 FOCUS ON EARTHQUAKE RECOVERY Value of Building Work in Canterbury- Trend Series (Quarterly trend value of work put in place, $m) Source: Statistics Trend value work in place $m 1,2 1, 8 6 4 2 Mar Mar 1 Mar 2 Mar 3 Mar 4 Mar 5 Mar 6 Mar 7 Mar 8 Mar 9 Mar 1 Mar 11 Mar 12 Mar 13 Mar 14 Building Activity and Consents Building activity increased as the rebuild began in late 211 and has been growing since. In the second quarter of 214, $62 million of residential building work was underway and $368 million non-residential work was put in place in Canterbury, a total of $97 million. Residential building work increased a seasonally adjusted.3 percent (following a big increase the previous quarter), nonresidential was up 15 percent, and all buildings was up 6 percent, compared to the previous quarter. Overall building activity increased across the whole of, up a seasonally adjusted 2 percent in the June 214 quarter, again following a big increase the previous quarter. Building consents series are an indicator of future building activity. Since the earthquakes there has been strong trend growth in the number of consents authorised in the city and region. Residential Canterbury Trend Total Buildings Canterbury Trend Non-residential Canterbury Trend In the September 214 quarter, there were 1,31 new dwellings consented in Christchurch city, up significantly from 725 in the September 213 quarter. The number consented across Greater Christchurch (Christchurch, Waiamkariri and Selywn) increased to 1,55, from 1,389 the previous year, driven by growth in the city. The value of non-residential building consents (for new nonresidential buildings in Christchurch city) increased from $141 million in the September 213 quarter to $313 million in the September 214 quarter. Consent authorisations are expected to remain high for some time and rebuild plans continue across the city and region. Building Consents Christchurch CBD (Value of Consents, All New Buildings $m) Source: Statistics, CERA $9 Dwellings Consented (Number of dwellings consented, all new residential buildings) Source: Statistics Number of dwellings consented 4, 3,5 3, 2,5 2, 1,5 1, 5 Jan Jan 1 Jan 2 Jan 3 Jan 4 Jan 5 Jan 6 Jan 7 Jan 8 Jan 9 Jan 1 Canterbury (RHS) 7 6 5 4 3 2 1 $8 Value of consents, new buildings $m $7 $6 $5 $4 $3 $2 $1 $ Apr 11 Jul 11 Oct 11 Apr 12 Jul 12 Oct 12 Apr 13 Jul 13 Oct 13 Apr 14 Jul 14 In the three months to August 214, there were an estimated 41 building consents issued in the Christchurch Central Business district, worth around $15 million dollars. This area encompasses that enclosed by the four avenues and including Hagley Park. This was made up of 19 consents for new residential buildings and 23 consents for new non-residential buildings. An upward trend is beginning to appear for consents in the CBD, suggesting improving momentum in the central city rebuild. The number of consents each month is however quite low and volatile which makes trends hard to observe. NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 13 Producers Price Index Base 2 Q1 = 1 Source: Statistics NZ, CDC PPI Output Q1 2 = 1 2 18 16 14 12 1 8 6 4 2 Producers Price Index The Producers Price Index for, published by Statistics NZ and rebased by CDC to 2 Q1, shows that the cost of construction related output has generally increased faster than output in other sectors, especially since the earthquakes. In particular, the cost of building construction has increased by 8.3 percent between the second quarters of 211 and 214, compared to 3.8 percent across all industries. As the rebuild continues it is likely that there will be further upward pressure on the price of construction, especially in Canterbury. Building Construction Heavy and Civil Engineering Construction Construction Services All Industries EQC Progress As at November 214 Source: EQC, CDC Land Exposures EQC and Insurance Progress As at 3 November 214, EQC has paid out $7,928,198,36. They have completed nearly all of their contents exposures, with only 1 percent remaining. Full home, Building and Land exposures are progressing slightly slower, at 87, 86 percent and 73 percent respectively. Contents exposures Building exposures Full home repairs % 2% 4% 6% 8% 1% SCIRT Progress As at 22 October 214 Source: SCIRT, CDC Done or Closed Remaining SCIRT Progress As at 22 October 214, SCIRT had completed 7 percent of its freshwater pipe, having laid 48 kilometres. 32 pump stations and reservoirs have been repaired or replaced. Additionally they have completed 5 percent of wastewater pipe repair (328 kilometres), 52 percent of stormwater piper repair (14 kilometres) and have laid 425,975 square metres of new roading, representing 32 percent of expected new roading. Note, some components of the repair process need to be completed before final work, such as roading, can occur. Road Pavement Laid Stormwater Pipe Wastewater Pipe Freshwater Pipe % 2% 4% 6% 8% 1% Accommodation Cafes and Restaurants Completed Remaining In the June 214 quarter the capacity (stay units average over three month period) at accommodation establishments in the Canterbury region (excluding holiday parks) was 11,11, up from 1,429 in the June 213 quarter, but still well down from 14,51 average over the three months to June quarter 21. The sector is recovering, but there is still some time before bed units are up to the level pre-earthquakes (source: Statistics ). In the September quarter (1 July to 3 September 214), the central city area, including Hagley Park, had 14 new or re-opened cafes or restaurant operations register with the Christchurch City Council, up from 9 the previous quarter (source: Christchurch City Council). NOVEMBER 214

SEPTEMBER 214 QUARTERLY ECONOMIC REPORT 14 Guest Nights Guest nights in the Canterbury region are slowly continuing to improve. In the three months to August 214, guest nights were up to 851, from 81, over the three months to August 213 This is still a fall from prior to the earthquakes, with 939, guest nights in Canterbury in June to August 21. Encouragingly, international guest nights appear to be recovering with on average 34 percent of guest nights from international visitors over the three month period ending August 214. International visitors tend to spend more on their holidays so these visits have a greater flow-on to the rest of the economy. The numbers are still below pre-earthquake levels however, with 41 percent of visitors international over the same period in 21. As hotel establishments and visitor attractions continue to reopen, visitor numbers in the city and wider region should continue to improve. Guest Nights Canterbury (s) (Domestic and International Guest Nights) Source: Statistics 7 Number of guest nights, 6 5 4 3 2 1 28M1 29M1 21M1 211M1 212M1 213M1 214M1 Guest nights Domestic guest nights International guest nights Status of Major Attractions The table below shows the status of the major tourist attractions in Christchurch city Attraction Status Attraction Status The Court Theatre Relocated to Addington Ferrymead Historic Park Open Christchurch Botanic Gardens Open including new visitors centre Punts Open Quake City New attraction Tramway Open Canterbury Museum Closed, re-opened, may close in future ChristChurch Cathedral Historic Cathedral closed, new cardboard Cathedral Open Air Force Museum Open Isaac Theatre Royal Closed, reopening November Orana Wildlife Park Open Science Alive Closed Willowbank Wildlife Reserve Open Art Gallery Closed Christchurch Gondola Open Arts Centre (Majority) Closed International Antarctic Centre Open Christchurch Town Hall Closed International Education Traditionally Canterbury was a well-performing destination for international students in. Between 23 and 21, around 17% of international students in chose to study in the Canterbury region, behind only Auckland. International students saw a significant decrease following the earthquakes, with numbers dropping from 15,21 in 21 to 6,543 in 212. International student numbers in the region recovered slightly last year (213), reaching 7,24. International fee-paying students in Canterbury, total Full year Source: Education Counts, CDC 18, Number of Students 16, 14, 12, 1, 8, 6, 4, 2, 27 28 29 21 211 212 213 Canterbury Proportion of NZ (RHS axis) 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % Proportion of NZ NOVEMBER 214

Data Sources ANZ: http://www.anz.co.nz/commercial-institutional/economic-markets-research/ BNZ- Business NZ: http://www.businessnz.org.nz/surveys/51 Canterbury Earthquake Recovery Authority http://cera.govt.nz/ Christchurch City Council www.ccc.govt.nz Earthquake Commission: http://www.eqc.govt.nz/ Education Counts: https://www.educationcounts.govt.nz/statistics/international Infometrics Ltd: http://www.infometrics.co.nz/ Insurance Council of : http://icnz.org.nz/ Ministry of Business, Innovation and Employment: http://www.dbh.govt.nz/ Institute of Economic Research Inc (NZIER): http://nzier.co.nz/ Paymark: http://www.paymark.co.nz/cms_display.php Real Estate Institute : https://www.reinz.co.nz/ SCIRT: http://strongerchristchurch.govt.nz/ Statistics : http://www.stats.govt.nz/ This work is based on/includes Statistics s data which are licensed by Statistics for re-use under the Creative Commons Attribution 3. licence. Feedback and suggestions Contact Amy McNaughton Economist Canterbury Development Corporation Ph+64 3 378 93 amy.mcnaughton@cdc.org.nz