A determined but short-lived bounce for regional economies at end of 2021

Economic activity staged a comeback in the December 2021 quarter as Delta restrictions were gradually eased at different times across the country, with mixed results seen across regional economies. Infometrics’ December 2021 Quarterly Economic Monitor shows economic activity rose 2.8%pa in the quarter on provisional estimates, with delayed demand after the Delta restrictions being unleashed, and a reasonable summer being enjoyed across many local economies.

“Economic activity showed a determined bounce in the December quarter, as Kiwis started to spend more, travel resumed at higher levels, construction activity picked up further, and jobs rose,” says Infometrics Principal Economist and Director Brad Olsen. “However, this bounce-back has been short-lived, with regional economies bracing for the disruption of Omicron to restrict workforces, increase absenteeism, and further stretch supply chains.”

“Filled jobs numbers have continued climbing as demand remains high, with Jobseeker Support numbers falling and the unemployment rate reaching a record low at the end of 2021. The value of building activity remains at record levels, commodity prices are strong, the milk pay-out is up, and spending has rebounded in many sectors. These factors all provide confidence for regional economic outcomes, but the challenges ahead are clear to see.”

Uncertainty and the hesitancy of going out (HOGO) also showed through in some regional areas at the end of 2021. “With consumer confidence falling, there were increasing concerns about just how much New Zealanders would be willing to get out and about over the summer period. This challenge is increasing in 2022, with many staying home more throughout the Omicron outbreak due to the risk of getting COVID-19, which has reduced activity in sectors such as hospitality and events,” says Mr Olsen.

Economic growth in 2021 shows a mixed message of some strongly performing areas, alongside areas which have seen a strong revival from a harder-hit 2020 period. Compared to pre-pandemic levels, economic activity has been strongest across the central North Island, with Hawke’s Bay, Taranaki, and Manawatū all recording strong gains. “Primary sector-focused economies generally continue to see the strongest economic results. Areas that had a greater international tourism focus pre-pandemic, and urban centres, are recovering at a slower pace,” says Mr Olsen.

Prolonged restrictions from the Delta outbreak kept some local economies subdued throughout the December quarter. “Activity in the upper North Island was more limited in the December quarter, with higher Alert Levels for Auckland and parts of Waikato, Auckland kept isolated until mid-December, and Northland being at Red during its usually busy summer months.”

Higher inflation remains a concern, particularly in provincial economies. “Inflation accelerated to a 30-year high of 5.9%pa in December 2021, with inflation across provincial North Island centres even higher, at 6.7%pa. Many regional economies are facing sustained inflationary pressures as supply is unable to keep up with demand, and costs are going through the roof.”


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