New Zealand economy stable in face of global headwinds

Thursday, 10 March 2022

The New Zealand economy remains stable due to high employment levels, strong construction activity and the primary sector, despite the gathering headwinds of war in Europe and declining house prices.

Dot Loves Data’s latest resilience index shows the economy is steady in the face of global uncertainty, but there is a stark contrast between the “haves” and “have-nots” in each sector.

Director Justin Lester said the divide in the economy was seen when comparing the success of construction and digital sectors with the tourism and hospitality sectors.

“Construction, digital, export and primary sectors continue to perform strongly, but the weakness we’ve seen in tourism, retail, accommodation, events and hiring is at its lowest and arguably crisis levels,” Lester said.

There was risk supply chain disruption and inflation could overheat the local and global economy, he said.

“The flow of money from Government coffers, increased lockdown construction spending, and disruption to supply chains is significantly impacting on the costs of goods and services. This is having a significant impact on wage inflation.”

Dot Loves Data’s resilience measure runs a scale of one – low resilience – to seven, to show how the economy is holding up.

Justin Lester, says the economy remains stable, despite the gathering headwinds of war in Europe and declining house prices.

It measures business openings, business closures, longevity of businesses and consumer demand. This is then compared against historical data to forecast the net growth of businesses over the next 12 months.

It said New Zealand was at a resilience level of five, the same as it has been since December last year.

Nationally there were 5343 business openings in December and 2937 closures, which remained steady compared to the last 12 months.

Auckland was still some way off recovering from the impacts of lockdown, but business health was showing signs of bouncing back as a third of all new business openings in February were in Auckland, he said.

“Auckland faced an unprecedented second half of 2021 with the City of Sails being locked down for five months and experiencing significant disruption to work and business life. Consumer spending was significantly impacted and the Auckland CBD precinct has come under even greater pressure.”

Pressure in the Auckland CBD was seen most clearly in the hospitality sector.

Consumer spending in CBD bars was down 31 per cent and restaurants and cafes was down 19.8 per cent in January and February.

The trend of a hurt hospitality was echoed across the broader Auckland region, he said.

In Wellington, employment levels remained strong, but consumer spending dropped by 10 per cent.

Again this was reflected in hospitality, with consumer spending in restaurants and cafes down 30 per cent and bars were down 40.1 per cent.

Christchurch told a similar tale to Auckland, with steady business openings while consumer spending in February was down 4.8 per cent, while spending in hospitality businesses were down 16.8 per cent.