Building towards a boost in the economy

IT CERTAINLY feels like the economy is drifting, directionless, into a languid summer. Talk around the Fairfax bunker this week was that few of the business journalists here were picking up any signs of confidence out in the market.

However, there was one number that emerged last week that could be a sign of better things to come, for some anyway.

Let’s face it, when building activity is robust, New Zealand seems to do pretty well. It is one industry with the potential to deliver a lot of jobs, both directly and indirectly.

So when Statistics NZ reported that the seasonally adjusted volume of building activity increased 9.6 per cent in the September quarter, I paid attention.

There are two really positive things about this number. First, it is the biggest increase in 10 years. Second, both islands are getting a share of the activity.

You might expect building activity to be heavily concentrated in Christchurch with the earthquake rebuild at last gathering pace. However, Auckland is also benefiting.

The shortage of housing stock in Auckland is undeniable, though there are still lively arguments about the cause of that.

Some blame restrictive town planning that won’t allow further outward expansion. Others point out that there are plenty of sections on the market, but people don’t want to live on a city fringe 15km from the city centre.

Others point to leaky buildings, or the fear of leaky buildings, taking a chunk of housing stock out of consideration for many buyers.

Whatever weighting you give to these factors, it is clear there aren’t enough affordable homes and when that happens the market responds.

Statistics NZ said the number of building consents for new dwellings in the Auckland region has grown recently, reaching the highest level in four years.

Also of interest in the numbers is the level of non-residential building outstripped residential, with a 12.4 per cent increase compared with 7.1 per cent.

The downstream benefits of this will flow into the moribund retail sector in due course and, in time, hopefully into employment as well, though it may take time for employers to gain confidence that any turnaround is here to last.

Now we just need a few other ducks to form a row – a bumper summer for grass growth could be one, but on last year’s evidence that means a bad summer for just about everything else.

It wouldn’t hurt if the dollar came down a bit either, though that may be unlikely if economic activity is seen to be picking up.

In that context, we need the US and Europe to sort themselves out.