ASB downgrades Hawke's Bay economy, rock-star dream fades

ASB's regional economic scoreboard. Image / Supplied

A new report from ASB Bank has shown Hawke's Bay's regional economy has cooled off, reducing the region's economic status from rock-star to one-hit wonder.

ASB's latest quarterly Regional Economic Scoreboard, which last quarter expected the region to hit a "five-star" economy, has instead downgraded the region's economic ranking from the nation's sixth-best performer to 13th overall.

"Unfortunately for the Hawke's Bay, the region has slipped seven spots to 13th in the latest Scoreboard," the report said.

"Despite the fall, the region's housing market remains strong, with the Bay topping the house price growth stakes nationwide. In addition, annual jobs growth was robust. However, both house and car sales fell over the quarter in annual terms. And when combined with weak household sentiment, this leads us to trim a star off the Bay.

"Looking over the remainder of the year, we suspect the Bay will rebound soon, particularly as horticulture, forestry and sheep sector returns are robust."

The report showed although house prices rose 15.7 per cent, and construction values rose 18 per cent, retail sales across the region grew just 2.3 per cent and new car sales volumes dropped by 6 per cent.

The ASB report came just a day ahead of Westpac chief economist Dominick Stephens' warning that although the Hawke's Bay economy was at its peak, the party was effectively "over".

Hawke's Bay Chamber of Commerce chief executive Wayne Walford said trades and highly skilled staffing shortages also affected the region's ability to prosper.

"With serious staff shortages over the fruit-picking season this has put pressure on a lot of businesses, with people working overtime and added pressure to find employees.

"The negative messages around skill shortages test the region's optimism."

However, house sales always lifted in spring and people wait out the winter for "better prospects".

Property Brokers regional manager Paul Whitaker said he did not see much changing overall in the housing market.

"There is still a fine balance between listings and sales, and prices are still strong. Although, we do anticipate over the winter period a slight slow-down, but with no natural disaster or anything to change interest rates significantly, if there is going to be a downturn, we expect it to be a very slow one."

He added that although the Government's KiwiBuild scheme intended to bring more houses on to the market, they would not be enough, or the correct type of houses, to influence the overall market.

Similarly, Rob Townshend from Bayswater European and Bayswater Vehicles, which account for 13 franchise car dealerships, said dealers had experienced a great start to the financial year.

"April, this quarter, with our Hyundai and Isuzu brands, out of our Napier Hyundai operation, we had the best months we've ever had. The previous best month we had was 74 cars and we did 102, we had a massive uplift in April.

"We haven't seen much of a downturn at all.

"I think there is definitely a bit of a business confidence issue - that's a bit of a worry. Probably people are worried about what moves the Government are going to make because it has been a rock-star economy, we don't want to change it too much."