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Where should we for look for clues about the economy in 2022? What are the statistics that will define the year? For our annual look at the economic year ahead, we ask some of New Zealand's leading economists what they think will matter most.
Forecasting is never easy, especially in a pandemic, but last year's top five trends to watch weren't too far off the mark.
They were: The pandemic (vaccine rollout and border re-opening), house prices, business confidence/business investment, inflation and the Government's finances.
This year the pandemic is still with us and is a big uncertainty.
But as we learn to live with new variants it looks more like something that can shift the time frame on recovery without necessarily changing its course.
So it's an old school economic villain that tops the list, looking set to define the economy in 2022, overshadowing almost everything else...
Inflation
It should probably be no surprise that the rising cost of everything dominates the list this year.
It's been building as an issue since the pandemic first shut down ports and factories in March 2020.
Inflation did make the list last year as many picked its return. As Cameron Bagrie said then: "There is a building case for inflation turning up after years of dormancy. We have not seen this sort of cost-push inflation pressure for a long time."
And so it has played out.
In New Zealand the last official figure has annual inflation sitting at 4.9 per cent - but it is tipped to be closer to 6 per cent by now.
In the US it's already there; latest data shows annual inflation at 6.2 per cent - the highest level since 1982.
"It will be interesting to see whether this is really temporary or more persistent," says NZ Initiative chief executive Oliver Hartwich, summing up the great economic debate of the age.
"There are of course many different measures for inflation, both here and overseas, and I wouldn't want to single out one of them. It's a global phenomenon, so let's watch this play out globally in all its forms."
More specifically though, and especially for us here in New Zealand, we should watch shipping costs, he says.
"The supply chain disruptions are a massive headache. Optimists say that things will normalise by the middle of next year, but even then, New Zealand will probably be at the tail end of normalisation. That means disruptions here could last longer than elsewhere."
ANZ chief economist Sharon Zollner agrees, saying "supply-side indicators" will hold the key to understanding the inflation outlook.
"That's not something we're used to watching closely, and the data is a bit patchy," she says. "But we can look at shipping costs and delays, port wait times."
Surveys such as the NZEIR Quarterly Survey of Business Opinion and the ANZ Business Outlook will also provide insight into what's happen at the coal face for firms.
"As economists we're used to broadly forecasting demand and assuming the supply side will match it. That's not going to cut it this year."
Westpac chief economist Michael Gordon will also be watching the sources of inflation.
"The spike in inflation in 2021 was due to several factors all coming together at the same time. We know that some of these were supply shocks that will be temporary or at least non-repeating," he says.
"But the key [in 2022] will be the extent to which we see repeated price rises, driven by domestic conditions, which in turn will require a monetary policy response."
"We see real risks that inflation will continue to surprise on the upside and force the Reserve Bank to try and play catch-up in terms of interest rate rises," says Infometrics chief forecaster Gareth Kiernan. "[That] obviously has potential big implications for outcomes in the housing market and household spending."
If wages start to chase prices higher then there is a risk that an inflationary spiral is in play.
"The labour market is likely to be the dominant source of inflationary pressure over the next year," says BNZ head of research Stephen Toplis.
For a gauge of how much this and other factors will pressure generalised inflation then pricing intentions are the place to look, he says.
Inflation might be "transitory" but seems to be lingering on regardless, says ASB chief economist Nick Tuffley.
"Supply chain challenges may start to get resolved over 2022, but high import costs look set to continue over 2022."
The labour market also looks like it will remain tight for a sustained period, he says.
"Although headline inflation should abate by end-2022 from the 2021 extremes, how hard will the RBNZ need to lean against the pressures?"
Kiwibank chief economist Jarrod Kerr also hopes to see it ease in the second half of 2022.
"If not, then we will see an even more assertive RBNZ. Alarm bells at the Reserve Bank will start to ring if higher inflation becomes embedded in wage-price setting behaviour."
All that inflation worry points to more interest rate rises in 2022.
We're now in the first tightening cycle in seven years and coming off an unprecedented low, says ASB's Tuffley.
"Already, mortgage rates have charged higher in response to financial market anticipation that the OCR will peak above 2.5 per cent," he says.
"How much bite will interest rates have, given the recent speed and that there are a whole lot of new borrowers who have never faced rising interest rates until now?"
Infometrics' Kiernan says he believes the Federal Reserve's recent change of stance leaves our Reserve Bank looking like a bit of an outlier with regards to its view that a lot of current inflation is one-offs or temporary.
"We all know the RBNZ is going to have to continue tightening monetary policy in its bid to moderate labour market tensions and CPI inflation," says BNZ's Toplis.
"The question is how much will it have to tighten, and how aggressive will the economic response be to that tightening? In this regard, indicators that give the earliest insight into these developments are at the top of our list."
It would have to be an unusual year for the housing market not to make the list of economic trends to watch in this country.
The weirdness of the pandemic certainly wasn't enough to dent its growth and, if anything, seemed to turbo charge it.
"With mortgage rates now on the rise, that dynamic will soon go into reverse," predicts Westpac's Gordon.
"We're expecting a turn to moderate price declines by the second half of next year, but even if you don't believe that, a sharply slower rate of increase will still have a major impact on people's willingness to spend compared to what we're used to right now."
Bagrie expects to see the squeeze go on the Auckland property sector.
"Is a reality check pending? Fundamentals have shifted a long way. Not just in residential but in commercial property too," he says.
"Every year it is a hot topic for dinner table and BBQ discussions," says NZIER principal economist Christina Leung.
"Over the coming year, higher interest rates, new housing supply and measures particularly targeted at property investors should provide headwinds to house prices."
But as we've seen over the past year "things don't always pan out as planned", she warns.
This year the data will be less about the woes of being out of work.
"In the short term, employment is going to be all about the supply of labour – demand is not the constraint at present," says Zollner.
"Will endemic Covid see the labour force participation rate fall? Will gradually reopening borders ease the problem, even assuming Omicron doesn't derail those plans, or will we see an outflow that more than cancels out the gains?"
Despite the focus on the supply side, BNZ's Toplis says the unemployment rate is as good a figure to watch as any.
"You could name any number of labour market indicators but, ultimately, the unemployment rate is the best one to define the balance between supply and demand," he says.
"Other indicators will tend to provide only one side of the story. If you want a potential leading indicator, then NZIER's difficulty in finding labour series is a worthy candidate."
Whether employment growth remains strong will to a large degree depend on how the New Zealand economy fares over the coming year as we adapt to a "new normal" under Covid-19, says Leung.
"It will be interesting to see how migrant and tourist flows progress as border restrictions are relaxed over the coming year, and the net impact this will have on the New Zealand economy," she says.
Kiwibank's Kerr describes it as "a perfect experiment for our labour market."
"It is relatively well argued that New Zealand's migration policy has put downward pressure on wages. And here we are without migration."
There are risks that, as global conditions return towards normal, there's an outflow of Kiwis who have come back to avoid the worst of the pandemic, or who have delayed their OEs over the past couple of years, notes Infometrics' Kiernan.
Finally, last but (unfortunately) probably not least, is the virus.
"To what extent will NZ's health system cope with endemic Covid-19? Comfortably, or will there still be periods of relatively restrictive actions taken to contain the health pressures?" says ASB's Tuffley.
"Will subsequent variants of Covid-19 be milder or more vicious/vaccine resistant – and so to what extent can human beings get on with life?"
It has a significant bearing on New Zealand in 2022, says Westpac's Gordon.
"We're expecting that as housing and consumer spending step down, international travel will step up as a source of demand. That means the timing of when the border reopens is becoming quite important for our overall growth outlook," he says.
"And we're really on the virus' timetable as to when that will be feasible."
"While not an economic indicator, as such, we will be paying close attention to the Covid hospitalisation numbers," says Toplis.
"Hospitalisations will determine whether or not the Government might reimpose restrictions on the economy. Furthermore, hospitalisations are likely to have a direct impact on confidence levels."
Cryptocurrency
Zollner says she'll have an eye on Bitcoin in 2022.
"Not for its own sake so much (though it's big enough to matter) but rather as a proxy for the devil-may-care global attitude to risk that is looking fairly, shall we say, "mature" and could get more than a little messy on the unwind, and in a much broader sense than just cryptocurrencies."
China
Always a big influencer globally and for the local economy China's fortunes will be worth keeping on watching, says Bagrie.
In 2021 it has battled a property crash most obvious in the meltdown of investment giant Evergrande.
Zollner notes the influence on local commodity prices.
"Is the Chinese consumer about to suffer a wealth shock via their real estate sector?"
NZ Initiative's Hartwich recommends keeping an eye on The Economic Policy Uncertainty Index (www.policyuncertainty.com).
"It highlights what strange times we're living in. Note the rise in political uncertainty in China."
Climate change
"The "climate emergency" and New Zealand's broader environmental objectives will have far-reaching implications through 2022," says Toplis.
"There are huge regulatory changes ahead. This will have a significant initial cost impact on business. Agriculture and transport will bear the initial hit but no business will escape the need to change."
Balancing the books
Ultimately 2022 could go down as the year we remember that we actually need to live within our means, says Zollner.
"That's what tightening monetary and financial conditions will do. Certainly not nearly as much fun as throwing caution to the wind, but a pretty important stage to go through," she says.
"And the sooner the better, because you can't avoid it, and putting it off makes it worse."
Can we manage a smooth transition?
"Historical experience suggests we unfortunately tend to get more of a collective freak-out when a sudden change of circumstances comes along – typically originating offshore," she warns.
"The RBNZ will be doing well to actually bring about the soft landing that we're all forecasting in that context."
Reserve Bank says leaving banks to their own devices hasn't worked.