Quarterly Economic Monitor from Infometrics once again suggests a relatively resilient overall economy for Nelson Tasman
Posted on Monday 21 June 2021
The latest Quarterly Economic Monitor was recently released from Infometrics. The following narrative provides an overview, with further observations from Infometrics and feedback from our team on what they are hearing from businesses.
Once again, the Monitor suggests a relatively resilient overall economy for Nelson Tasman. The positive signs also highlight again some contradictions between the general picture and the realities being heard from many businesses. Apart from the fact that some whole industries have been hit much harder than others, many of the adverse effects of COVID-19 apply in varying degrees across industries.
The Monitor shows positive signs in non-residential consents and consumer spending (both indicators of business confidence) for the March 2021 quarter, which both performed better than the national average over the year to March 2021. Infometrics comment that our economic resilience is underpinned by industries such as construction, retail, health care and the public sector, and job creation is happening in these industries. By contrast, there has been a decline in administrative and support services which Infometrics attribute partly to businesses reducing their procurement of external business-to-business services and reverting to in-house resources.
We know that individual businesses are struggling with some significant challenges that may inhibit further recovery over the coming quarters. High amongst these are the pressures on general freight rates and availability, supply chain interruptions and delays and shipping constraints impacting export businesses. Infometrics commented that it is thought that these issues will not be resolved to any real degree until border restrictions are eased markedly in both NZ and Australia, and even then it will likely take until mid-2022 for supply chain efficiencies to get close to pre-COVID levels. Other challenges being seen by our Regional Business Partner team include data management and quality and insufficient risk management practices which have been highlighted by COVID. On a more positive note, our team observe that most of their export customers are confident about revenue stability over the coming year and that many are reporting a stronger performance in FY20/21 than the previous year.
The relatively low unemployment rate in the region (3.2%) and the positive growth in employment (0.8% over the year to March 2021) shown in the quarterly report is considered likely due to seasonal jobs and the lack of overseas workers to fill them, but it also means labour supply is constrained. Labour supply and challenges of recruiting key skills continues to be a key constraint for many of our businesses across a range of industry and job types. Specific examples we have heard over the past fortnight include challenges of sourcing & recruiting skills such as mechatronic engineers, software engineers, robotic welders, export sales managers – also professional planners.
Yet at the same time, the number of Jobseeker support recipients (over 3,600 individuals, and a 38% increase over the year to March 2021) remains high, with increases being seen in underemployment. Infometrics comment that people are employed but not working as many hours as they would like.
For families and households, housing price increases are the most visible issue and Infometrics point to some interesting trends in the housing market in the region. These highlight lower growth in house values than the national average, solid growth in consent levels, and quite low growth in the number of house sales. At the same time, they highlight that both housing and rental affordability are worse than the national average, but that this is likely to be more a function of low household incomes than purely of rapid increases in house prices. They also show quite large discrepancies between Nelson and Tasman in most indicators – higher growth in house values and consents in Tasman, but more house sales in Nelson. This appears to align with the data observed for domestic migration in the region, where net domestic migration for 2020 was slightly negative for Nelson and positive for Tasman.
Turning to Tourism, the Monitor shows that tourism spending overall has been much better than expected and while it has declined over the year, this is less of a downturn than it has been nationally. This aligns with what our Destination Management team are hearing on the ground; that while visitor spend in the region declined a little, domestic visitors have been fantastic at holidaying in Nelson Tasman and supporting local tourism operators. Richard Ussher from Cable Bay Adventure Park was recently interviewed on Seven Sharp acknowledging and thanking kiwis for their support. It is important to note that the spread of this visitor spend amongst individual operators has been very uneven; some businesses have done very well with an increase on last year, while others are well down and have gone into hibernation for the foreseeable future. Based on several conversations with Tourism operators over the past month, our Business Partner team are reporting a stressful time ahead for many businesses in the sector as we enter the off-peak season.
While the travel bubble with Australia brings cause for optimism, we are not typically a region which Australians would visit in winter months, so we don’t expect a sudden influx of Australian visitors, however if the winter months go well that will give Australian’s confidence to travel more in Spring and Summer. We are very conscious of the risk profile going forward which remains with any COVID outbreaks in Australia.
Finally, anecdotal feedback from our Regional Business Partner Programme Manager reflects relative confidence amongst their customers, reporting that many (customers) believe the global economic picture will improve over the coming 12/18month period and that most customers report a ‘cautiously optimistic’ outlook. Some emerging patterns are also being seen amongst these businesses, including:
- increasing focus on the customer experience i.e businesses wanting to be available 24/7 or process product for longer to increase their capacity outputs; engaging and iterating products based on customer feedback etc.
- A vast majority are planning to increase long-term investment in sustainability.
- Strong increase in R&D interest.
- Digital Transformation is a big topic for many, however most businesses want practical support to ‘implement’ – not ‘strategic’ support.
- A few businesses are trying to transform their business models by launching new products with a new target market focus.
- Many of our agri businesses are planning labour requirements for next season now, assessing what can be automated or trying to build alliances with other similar businesses to share labour.
For the full data visit: https://www.nelsontasman.nz/do-business/insights/