Infometrics' Quarterly Economic Monitor showed the Bay's GDP grew 1.6 per cent in the year to June. Photo / Mead Norton
Infometrics' Quarterly Economic Monitor showed the Bay's GDP grew 1.6 per cent in the year to June. Photo / Mead Norton
High export prices and strong consumer spending boosted the Bay of Plenty's economy to grow faster than the national average in the year to June, a new report shows.
But the region's construction sector has softened as economic headwinds make households and investors more cautious.
Infometrics' June 2022 Quarterly EconomicMonitor showed the Bay's GDP grew 1.6 per cent in the year to June. This was more than the 0.9 per cent rise in annual economic activity nationally.
Consumer spending in the Bay was up 2.8 per cent compared to no growth in national spending in the year to June.
One driver of the Bay's strong consumer spending was the region's tight labour market, as a 4 per cent employment growth pushed the unemployment rate to a decade-low 3.9 per cent.
High commodity prices grew in the forecasted dairy pay-out for the 2021/2022 season, up $178 million from the previous season to a total of $1.1 billion assuming production levels from last season were maintained.
Agriculture comprised 9.6 per cent of the region's production in the year to March 2021, so a highly productive agricultural sector was a vital contributor to the Bay's high level of economic activity, the report said.
However, Bay households were more cautious when making big purchases, including homes or cars, with house sales down 28 per cent and car registrations down 7.3 per cent. Residential consents were also down 4.5 per cent.
Infometrics principal economist and director Brad Olsen. Photo / Supplied
Infometrics principal economist and director Brad Olsen said underlying economic activity had picked up since the earlier peak in Omicron cases in March as New Zealand moved to orange and spending activity rebounded.
"But capacity constraints around finding enough labour and materials have prevented regional economies from growing even further."
Olsen said growth in filled jobs across New Zealand had been more restrained in recent months, despite job ad numbers and underlying demand for workers remaining high.
"A tight labour market provides a strong foundation for regional economies but is also piling the pressure on, as short-term sickness and a continued brain drain of young talent make it hard to resource current levels of business.
"Around half the current net migration outflow from New Zealand is young people, presenting a key constraint on provincial economies, which are struggling to source the talent needed."
Olsen said high inflation and rising interest rates were weighing on household sentiment and undermining spending growth.
"Although spending levels are up from a year earlier, high inflation means Kiwis are getting less bang for their buck.
"Infometrics estimates suggest around 40 per cent of recent increases in spending are due to inflation rather than real growth in spending volumes."
Overall tourism activity in the June 2022 quarter was weaker despite the border starting to reopen, with a 6.9 per cent annual drop in guest nights across the country.
Olsen said after a strong run of domestic tourism, the recent pull-back had contributed to a softening in regional economies.
"The path ahead for regional economies remains uncertain, with New Zealand facing a range of negative influences including weak confidence, high inflation, rising interest rates, a tight labour market, and ongoing supply chain disruptions.
"However, these negatives will be mitigated by the border reopening, reduced Covid case numbers, and less restrictive trading conditions outside red [Covid traffic light setting].
"In the case of regions where international tourism was a highly important part of their economy, the offsetting positive effects of the border reopening could be considerable over the next few quarters."
Retail NZ chief executive Greg Harford. Photo / Mark Mitchell
Retail NZ chief executive Greg Harford said while things may have been relatively positive in the year to June, things were tightening up.
The latest Retail Trade Survey results from Stats NZ suggested retail spending in the Bay of Plenty was down 0.96 per cent in the last quarter (or 0.62 per cent in seasonally adjusted terms).
"This reflects the fact that customers are tightening their belts as the effects of higher interest rates and a depressed property market start to bite.
"We are seeing consumers look to reduce non-discretionary spending, and they are starting to trade down to cheaper brands."
Chief executive of Western Bay of Plenty economic development agency Priority One, Nigel Tutt, said the Western Bay economy had proven resilient in the face of difficult economic conditions.
It had outperformed the New Zealand average on many measures, he said.
"However, while the tight labour market continues to be a challenge for most employers in New Zealand, we tend to feel it more here in our region with higher-than-average housing costs affecting living standards."
Tutt said despite population growth, constraints of low housing, rental affordability, cost of food and petrol, difficulty in sourcing temporary labour for key sectors like horticulture and the increased demand on infrastructure continued to impact communities.
"Unemployment is currently as low as it will practically get, and while demand for people will continue due to the relatively strong fundamentals of this economy, housing and affordability will remain a constraint for a while yet."
Tauranga City Council's building services manager Steve Pearce said the number of building consent applications received appeared to have dropped in the first half of 2022 compared with the previous year.
However, he said consent numbers remained in line with 2019 and 2020.
"In the year July 1, 2021, to June 30, 2022, we granted 1980 residential building consents, compared with 2047 in the year before.
"However, if we look further back, we granted 1936 in the year July 2019 to June 2020 and 1976 in the year July 2018 to June 2019."
Pearce said there were a number of reasons for the variation in consent volumes in the past few years.
"Covid and the associated lockdowns have caused some peaks and troughs, as have the changes to our development contributions."
