Feeling the pinch: Gisborne city from the air in November 2023.
Feeling the pinch: Gisborne city from the air in November 2023.
Weaker economic activity and falling employment are hitting regional economies, with the “crunch” deepening across the country, according to Infometrics’ analysis of regional economies.
Employment falls across several private sector industries had driven job declines across seven of 16 regions, said Infometrics chief executive and principal economist Brad Olsen.
“It’stough out there, with fewer vacancies, and with unemployment set to rise over coming months, the economic hit isn’t nearly over yet,” said Olsen.
“But lower interest rates throughout the next year, as signalled by the Reserve Bank now that inflation is getting under control, will start to reignite economic sentiment to a degree, laying the foundation for greener shoots to emerge in the economy by mid-2025.”
The largest decline was seen in Tairāwhiti Gisborne, with a 1.2% per annum fall in filled jobs in the June 2024 quarter, followed by a 0.6% per annum decline in Taranaki, and a 0.4% per annum drop in both the Nelson and Wellington regions.
Infometrics chief economist Brad Olsen said the cuts to the Official Cash Rate on Wednesday were a start.
“The economy is clearly weaker, with households tightening their belts as unemployment rises and job security deteriorates. Businesses are reporting lower sales and limiting further hiring,” Olsen said.
“Economic sentiment remains poor, with the private sector struggling, even as population-driven growth in sectors such as health and education keeps headline numbers looking less downbeat than many are feeling.”
Employment growth was stronger in parts of the South Island, with job growth of above 1% per annum in both Canterbury and Otago, despite current economic headwinds, he said.
Retail trade, manufacturing, and the primary sectors were all facing challenging environments, as were construction and professional services, Olsen said.
National spending growth slowed markedly in the June 2024 quarter, with Marketview card spending data showing just a 0.3% rise.
“Although it’s encouraging to see inflation having slowed to 3.3% in the June quarter, this inflation rate still far outstrips growth in card spending, meaning households are buying less overall,” Olsen said.
Provisional estimates in the June 2024 Infometrics Quarterly Economic Monitor, suggested that economic activity in the June 2024 quarter was 0.2% (per annum lower) than a year ago, turning year-end growth negative (-0.2% pa).
Primary sector activity was mixed, with on-farm costs stabilising at high levels, and some commodity prices beginning to recover, Olsen said.
Dairy prices had improved, with the current season pay-out estimated to deliver $15.1b to regional economies, up $373m from last season.
Meat prices had shown some recovery in recent months, with beef prices at the end of June sitting 2.1% higher than in June 2023.
Sheep meat prices remained lower than a year ago, (by 16-33%), but had also shown some improvement in recent months.
Horticulture exports were performing strongly too, but forestry product export values are down 5.8% nationally in the June quarter, and recent prices had remained near 10-year lows, Olsen said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
