Lockdown day 77 Queen Street, Auckland CBD. November 2021 New Zealand Herald photograph by Michael Craig.
Lockdown day 77 Queen Street, Auckland CBD. November 2021 New Zealand Herald photograph by Michael Craig.
Despite the localised pain it caused, the wider economy appears to have handled the Delta outbreak and lockdown restrictions much better than expected, economists say.
The numbers for New Zealand third quarter GDP performance finally drop on Thursday and economists are forecasting a hit of between 3 and 4.5 percent.
That is "nowhere near as weak as anticipated", said BNZ head of research Stephen Toplis, who originally had a fall of 7 per cent pencilled in.
"This is not to say New Zealand hasn't been hurt that much by the recent round of Covid-related economic and social restrictions, Toplis said.
"The economy has certainly suffered (and in ways not captured by crude activity measures), and notably so in Auckland."
"Rather, our point is that the fall has been not as much as we initially figured on. And, thus, not as much as the 7 per cent drop that the RBNZ also estimated for Q3 GDP, in its November Monetary Policy Statement.
That large variance from the RBNZ forecasts confirmed the "inflationary bias" that the BNZ saw in the outlook, he said.
Recent data had shown that the hit to activity in many sectors was far less than was seen last year, indicating that businesses were better prepared to operate under Covid restrictions this time around, said Westpac economist Gregorius Steven.
Westpac is picking a fall of 3 per cent rather than the 6 per cent it had earlier forecast.
"That earlier forecast was based on our assessment of how much activity would be restricted at alert level 4, level 3 and so on," Steven said.
"But as the data has rolled in, it's proven to be much less negative than we expected, which suggests that businesses were much better prepared to operate under Covid restrictions this time around."
ASB senior economist Jane Turner, who is forecasting a 3.3 per cent fall, compared that with the previous alert level 4 lockdown which drove an 11.2 per cent decline in GDP over the first half of 2020.
Activity held up well across the board this time around and the resilience likely stemmed from two sources, she said.
"Firstly, GDP growth over the first half of the quarter (before Delta was discovered) was likely very strong, building on momentum from the strong Q2 GDP growth."
"Second, the strength of regional activity (i.e. regions outside of Auckland which were quickly returned to alert level 2 settings), must have been considerably stronger than expected."
Covid lockdown day 37 - level 3 City Rail Link (CRL) construction site, Albert St, Auckland. September 2021 New Zealand Herald photograph by Michael Craig
Another key difference appeared to have been the attitude and expectations of businesses heading in (and out) of the August lockdown – with many confident the impact would be temporary and poised for demand to catch up once restrictions eased.
Business confidence remained very high throughout September and October, she noted.
"Although it started to slip in November as it became apparent that elimination is not possible and the whole country would have to learn to deal with Covid-19 over summer."
Of course the real test will likely be the strength of the rebound, economists said.
"Ultimately, it's not the size of the fall that matters, but how quickly activity returns to pre-Delta levels. We expect this to be sometime over the first half of next year," said Turner.
She also noted that uncertainty remained elevated around quarterly GDP releases, with StatsNZ official figures often varying from market median expectations by more than a full percentage point.
- The official data is due at 10.45am Thursday December 16. Full coverage at nzherald.co.nz
