The opinion poll lead that Christopher Luxon currently enjoys over Chris Hipkins as preferred prime minister suggests there will be a change in government after October 14. And while the role that Winston Peters may play in any eventual coalition remains to be seen, one thing is for sure: the government will be faced with a steel industry being adversely affected by a stalling economy. The housing market is one of the key drivers of steel consumption – and the news is bad. After a fall of 14% in the number of housing consents issued in the one-year period to July 2023, that trend worsened to a 17% fall for the year to August 2023, in figures released this week by Stats NZ. In straight numbers, there were 42,110 new homes consented in New Zealand in the year ended August 2023. “This figure continues the downward trend from the peak of 51,015 in the year ended May 2022,” said Anna Howe, construction and property statistics manager at Stats NZ. “However, the number of new homes consented in the year

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ended August 2023 is still at a higher level than any 12-month period prior to 2021,” she added. The worst performer was stand-alone houses which saw a 25% drop in the year ended August 2023 compared with the year ended August 2022. In contrast, the number of multi-unit homes consented in the same period was only down by 10%. Multi-unit homes include townhouses, apartments, retirement village units, and flats.

Of equal alarm for the steel industry will be the 30% drop in home consents for the actual month of August in 2023 compared with the month of August in 2022. “Fewer new homes were consented in each month of 2023 so far, compared with the same month of both 2022 and 2021,” Howe said. “It is now almost a year since the number of new homes consented in a month exceeded the number consented in the same month of the previous year. The last time this occurred was in September 2022.”

According to Stats NZ, the four regions with the highest number of new homes consented in the year ended August 2023 were: Auckland with 18,003 (down 16% compared with the year to August 2022); Canterbury with 7,406 (down 15%); Waikato with 3,981 (down 22%); and Wellington with 3,267 (down 16%).

So, Luxon or Hipkins, whichever emerges victorious will have trouble on his hands. Despite its decision this week to continue its pause on interest rate rises, the Reserve Bank of New Zealand has clearly telegraphed its concerns about the economy. Thus, the possibility of a rate increase in November certainly exists. Going forward, it is the risk of persistent inflation coupled with low business PMIs which suggest the country is set for a markedly weaker growth performance in the second half of 2023. The RBNZ´s worry will be that the growth level might not be weak enough to bring inflation back to its target range by the end of 2024 – necessitating further rate rises. Either way, a cyclical slowdown is clearly under way and a period of below trend growth is upon us. Market analysts have advised therefore that the future focus should be not so much on the weak growth indicators, but on signs of disinflation. The September quarter CPI will be a key indicator, as will the September quarter labour market report in early November.