Quarterly Economic Monitor reflects positive but potentially short-lived increase in Nelson Tasman's GDP
Posted on Thursday 24 February 2022
The Infometrics Quarterly Economic Monitor (QEM) was released on Thursday 25 February for the December 2021 quarter. It presents some high-level messages about the region’s GDP, labour & housing market.
We have summarised some highlights from the report, alongside information we are receiving through our Business Surveys below.
- GDP increased by 5.5% in line with the national increase. This figure is abnormally high because it is compared to the heavily COVID-19 impacted 2020 year. This is likely to be a short-lived rebound however as Omicron is expected to disrupt economic activity over the early months of 2022. However what we are hearing from general businesses (outside of the visitor sector, mainly manufacturing) is that they were reporting steady progress under ‘Red’ and were fairly optimistic about the year ahead. The main anxiety (in this sample) is the supply chain uncertainty (freight delays, lack or slow raw materials, and mostly, cost increases). Overall, in our customer samples in this sector, businesses have a cautious outlook about the year ahead and are seen to be adapting strongly to the local/global trade conditions.
- Consumer spending increased by 5.8% (7% in Tasman, 5% in Nelson) over the year compared to 5% for NZ. However higher inflation in recent times (5.9% increase in the Consumer Price Index for the December 2021 quarter) means that the underlying real growth in spend is not as impressive.
- Visitor spend is up 10.2% vs 3.9% NZ. Spend in region was $292m for the year to December 2021, compared to $268m a year earlier. However this spend growth varies widely by category: commercial accommodation bookings were down 18% in Tasman and 26% in Nelson, reflecting the impact of the locked-down Auckland market. Spending on domestic travel was down 14% nationally over the December 2021 quarter compared to 2020, illustrating the softer level of domestic travel undertaken by Kiwis this summer.
This reflects what NRDA is hearing from local operators with recent comments including that Omicron is “killing confidence in travel”, with people now wanting to alter existing bookings to a later date due to concerns about arriving into an Omicron zone. Some businesses who have been struggling with staff have now made a call to reduce hours.
- Employment up 1.2% vs 1.7% NZ. Regional employment has continued to show steady increases over the last five years with no visible drop over the Covid-19 period. This is likely a result of our very tight labour market. Most of the year’s employment growth took place in Tasman, in construction, health and some recovery in accommodation, food services and retail. Nelson growth was much smaller although also in construction and health, and this may be symptomatic of the demographics in the City. Nationwide jobs growth slowed or fell in visitor-related industries, and the primary sector remains smaller than usual due to the difficulty in finding staff (overseas workers).
- Nationally, wages rose by 7.2% per filled job over the year, but it should be noted that while some employers are having to offer higher wages to secure staff, it is also the case that for some industries the limited existing workers are working longer hours to make up for absent staff and unfilled vacancies. Consistent feedback across most businesses that we have talked to about workforce challenges is a lack of labour supply – in both availability of staff numbers, parasitically at various skill levels, along with increased wage expectations. This challenge is both immediate and also long-term.
The combination of the recent 20 year high in average salary growth with the record low in unemployment is a double burden for businesses, however our recent Business Insights Survey showed that hiring intentions remain strong. Almost 70% of businesses identified recruitment challenges in their business over the last 6 months. These included supply shortage, increasing wage expectations, and a lack of skilled staff. Results from the survey also noted that businesses were offering more incentives, and making changes in their workplace in order to retain staff.
- Jobseeker Support recipients down 3.6% vs up 1.9% NZ however this is still 31% higher than pre-COVID-19. It should be noted that about one fifth of the reduction in numbers is estimated to be due to policy changes reclassifying some benefit recipients.
- Unemployment rate is 3.5% vs 3.8% NZ which offers little comfort for employers struggling to find staff. However the underutilisation rate nationally remains high at 9.2%. An MBIE presentation in 2021 estimated that the additional working hours untapped was the equivalent of 65,000 extra workers nationally (statement made by Ruth Isaac of MBIE in the EDNZ Congress Day 2 Immigration and Skills Shortage presentation on 23 November 2021).
- Average quarterly residential building consents were down 4.4% in the year, sitting at 168 per quarter in the December 2021 year, a little lower than the 188 in the previous year but still above the 10-year average of 156. The downturn may have been partly due to a shortage of planners in both regional councils.
- House values increased by 23% in year, compared to 27% NZ and the average house price in Nelson Tasman at December 2021 was $860k, (versus $1,028k for NZ. The most recent months show that the market has begun to turn a corner away from the huge growth of the past year or so now that interest rates have increased from the ultra-low COVID-19 intervention basis.
- House sales were down 13% in the region for the December 2021 year, due to a combination of lack of supply and more recently new lending restrictions. A total of 1638 houses were sold compared with the 10-year average of 1793.
- Car registrations picked up by 13.6% in region compared to the notable lows through 2020, and are back to the level seen immediately pre-COVID-19. Full-battery EV registrations rose 142% nationally in the year accounting for 4% of total registrations – double the share for the previous year.
- A similar picture is seen with commercial vehicle registrations, up 17% and back to pre-COVID-19 levels.