Quarterly Economic Monitor from Infometrics suggests Nelson Tasman is tracking relatively well overall in September quarter.

Written by Charlotte Lang

Posted on Wednesday 1 December 2021

The Infometrics Quarterly Economic Monitor (QEM) was released on Thursday 19 November for the September 2021 quarter. It presents some high-level messages about the region’s GDP, labour & housing market. The monitor’s coverage period reflects August’s nationwide lockdown  and the impact of the extended Auckland lockdown for the region. It indicates our regional performance in comparison to national averages, and highlights changes compared to the previous year.

The following summary draws out the main points from the QEM along with local insights our team are hearing on the ground.

National Overview

The September 2021 quarter was impacted by the Delta lockdown and associated ongoing restrictions, with national GDP during the quarter down 3.7% compared to the September 2020 quarter. Despite this quarterly decline, strong activity prior to lockdown over the first part of the year still meant that there was a 3.7%pa increase across the September 2021 year. Demand for goods and services remains high, with associated inflationary pressures and a very tight labour market set to persist into 2022.

The Covid restrictions have caused a $1. billion deficit in electronic card spending during the September quarter. Although there are already signs of a bounce back, ongoing uncertainty is moderating the strength of the bounce compared to after the first lockdown last year.

The national labour market is very hot with high numbers of job adverts and employers are citing this the most difficult period for recruitment, including the highest rates of staff turnover, since the 1970s. Skills shortages are increasing in scale and scope and show no signs of easing. In response, wage increases have begun to pick up.

Residential building consents for the September 2021 quarter have soared by 25% nationally compared to last year. Future growth in residential building is likely to be constrained by market capacity. Although regulatory restrictions have been eased with up to three dwellings to be allowed per property, translating this into available housing is difficult because of by the capacity constraints in the construction industry. These constraints persist because of shortages of building materials, as well as workforce challenges.

Nelson Tasman

The combined Nelson Tasman region has outperformed New Zealand across most indicators of spending, investment and labour market activity. This out performance has persisted since the June 2020 quarter when we exited the first lockdown period. The region has benefited from a combination of high prices for many of its key export commodities, high levels of domestic tourism, and ongoing population growth as the broader region is a popular lifestyle choice for New Zealanders to move to. 

Within the combined region, there were some notable differences for the year to September 2021 compared to 2020:

• Some of these differences can be attributed to the increased population growth and strong housing construction and associated activity in Tasman.
• For GDP, the industry mix and the ability to work from home during lockdown has influenced the figures.
• For consumer spending there was a notable difference: Nelson spending spiked at the start of Delta Level 2, then returned to virtually 2020 levels. Tasman spiked at the start of Delta Level 2 and has remained elevated ever since. This is consistent with what the rest of the country in that people are spending more time and money closer to home, and areas with large commuting populations have benefited strongly from this.
• Population growth as estimated by GP registrations is consistent with the greater availability of new housing in Tasman.  Tasman has been growing faster than Nelson since 2014.

Combined Regional GDP was up nearly 5%, consumer spending up 5%, and tourism expenditure up 12% - these indicators have all increased by more than the national average. Tourism spending was particularly strong, reaching $296 million for the September 2021 year, which exceeded 2019 spend (i.e. pre Covid), whilst nationally the figure is down 8% on the 2019 year. Spending over the coming summer will be dependent upon Kiwi household confidence in the face of travel risks and increasing inflation.

Although Jobseeker support recipient numbers are up by 7.4% over the past year, this is much less than the national average increase of 15%. The August 2021 lockdown resulted in a far smaller jump than was seen in the 2020 lockdown. The region’s unemployment rate remains extremely low at 3.5%, compared to 4.2% on average across the past year nationally. For comparison, the highest unemployment rate of recent times was 5.4% in the year to December 2012.

Commercial vehicle registrations have increased by 6.2% in the September year, less than the national average of 13% but still an additional 1,035 vehicles compared to the ten-year average of 916. 

The housing picture remains grim – regional prices for the September 2021 quarter were up 24% on the same quarter last year (NZ average up 30%), whileregional house sales were down 3.4% (the rest of the country rose by 22%). The decline in house sales points to a lack of supply, as well as decreasing affordability, neither of which are showing signs of improvement. Residential consents in Nelson Tasman fell by 2.1% across the September 2021 year, whilst nationally they rose by 25%. Most of the region’s decline occurred during the September quarter, with just 180 residential consents issued in the September 2021 quarter compared to 270 in the same quarter last year.

Consumer spending increased in line with the national average (4.8% vs 4.7%) for the year, and the region has escaped the major impacts on the September quarter that have affected the tourism hotspots and metro areas.

Employment for Nelson Tasman residents grew by 0.8% in the September 2021 year, slightly ahead of the national figure of 0.6% which was heavily bolstered by a very strong September quarter.  For comparison, the highest growth seen in regional employment in recent years was 3.1% in the March 2018 year.

Population growth, as estimated by increases in health provider registrations, has been stronger in Nelson Tasman (1.7%) than for average NZ (1.1%). Nevertheless, whilst this is a small percentage increase for the region there has been an increase of over 6,500 people since 2014.

Strong population growth is adding to housing demand, at a time when the supply of new housing is relatively limited. The average house price in Nelson Tasman is now $823,746. Nevertheless, sharp increases to mortgage rates, more stringent loan-to-value restrictions, and expectations that debt-to-income restrictions will be introduced are likely to flatten house price growth.

Local Insights

While statistically (QEM) our region is tracking overall relatively quite well, on the ground we continued to see significant underlying differences between and within sectors during the quarter, with huge challenges in some sectors, and sentiment of anxiety from many businesses.

Across Nelson Tasman we are hearing consistent messages from our businesses, especially in the visitor sector. Staffing, particularly for hospitality operators is an ongoing major problem as the lack of international working visa holders continues to make itself felt, and the other major factor is uncertainty. 

Although Golden Bay reports good results for the visitor sector, the rest of the combined region is reporting a high level of cancellations following the Blenheim Delta case, which was cited as being in the Nelson Marlborough DHB area. Other challenges include last-minute booking behaviour (which leads to difficulties in preparing motel rooms with fewer staff on hand); a lack of forward bookings for activities (but then having unexpectedly large numbers turning up); and bookings tailing off much sooner than usual in the peak period (leading to fears about surviving the off-season).

The impacts from COVID were exacerbated for many as lockdown situations continued, with some reduced resilience following the previous lockdown, and ongoing pressures. Supply chain disruptions  and freight challenges were a continuous topic of concern, as well as ongoing ‘Labour’ challenges and skills shortages. For business in general, major challenges remain in securing the skills and talent required and a significant factor in this is the housing issue – even those applicants on higher salaries are struggling to find homes to buy or rent. Recent announcements of easier pathways for residency for migrants has provided some welcome relief.

On a positive note, separate to Infometrics QEM data collection and reporting, NRDA have started tracking patterns of business births and deaths. Amidst the many difficult business stories within our regional economy, there is also one of the  resilience of entrepreneurship and willingness to start a business  throughout the COVID-19 pandemic in Nelson-Tasman, despite uncertainty of the most recent outbreak and associated lockdown.

During the September 2021 quarter there were 324 new businesses started, compared to 332 a year ago, while even during the strictest period of lockdown in April 2020, there were still 60 new business started (higher result than the 59 businesses started in December 2019 before the pandemic[1].  Benje Patterson of People and Places comments: “The relative resilience of the New Zealand economy has given many people the confidence to be entrepreneurial. Additionally, the rapid structural changes occurring in the economy have created opportunities for some new business ventures, while other businesses have been created by people who lost their jobs in industries that suffered because of the pandemic. This flexibility to adapt is something that can help drive New Zealand’s economic recovery”. 

We recognise that the QEM does not drill down into variances within sectors. Work is underway to build an Insights Panel for our region to ensure we have further detail of the challenges our businesses are facing and to to help us evaluate sector specific conclusions on how our businesses are faring.

Local businesses who are interested in helping us build our insights capacity are asked to please register to join our panel by clicking here.