Infometrics: Business investment and forestry offer Covid 19 relief

Infometrics: Rotorua economic activity fell 3pc in the September quarter. Photo / Getty Images

Business investment and a strong forestry sector are offering some relief to a battered Rotorua economy post-Covid-19 lockdown.

Despite Rotorua still feeling the effects of the Coronavirus pandemic, Bay business experts say economic indicators are better than predicted a few months ago.

Provisional estimates from the latest Infometrics Quarterly Economic Monitor show Rotorua economic activity fell 3 per cent in the September quarter, contributing to an annual decline of 4.6 per cent in the September 2020 year.

Non-residential consents rose 3.6 per cent in the September 2020 year. The ANZ Commodity Price Index shows in September 2020 forestry export prices were up 2 per cent per annum.

Rotorua Chamber of Commerce chief executive Bryce Heard said the economic indicators for the September quarter were "a lot better than we would have forecast a few months ago".

Rotorua Chamber of Commerce chief executive Bryce Heard. Photo / Andrew Warner

The statistic that "catches the eye" was the 32.4 per cent drop in Rotorua's residential consents compared to a 3.5 per cent rise for the rest of New Zealand.

"Given our housing shortage in Rotorua, that is one area that causes concern and is no doubt driving up the cost of houses."

Heard said the 18 per cent fall in tourism expenditure due to borders remaining closed to international tourists was less than expected.

"Given Rotorua's big tourism exposure, it could have been a lot worse and domestic tourism has helped to hold this up."

Red Stag Timber chief executive Marty Verry said the business was seeing wood processing running at near capacity this summer.

"It is planning increased capacity through the sawmill for 2022 onwards and will open its new CLT mass timber facility early in 2021. Recruitment is under way, filling up to 20 roles initially."

Red Stag Timber chief executive Marty Verry. Photo / Supplied

Verry said forest owners were also doing well currently.

"China's ban on logs from Australia is being seen as an opportunity, as well as a reminder of the risk of New Zealand's reliance on China for 80 per cent of its log exports.

"There is a strong recognition now of the need to support local processing."

Destination Rotorua interim chief executive Andrew Wilson said while many Rotorua businesses continued to suffer the effects of Covid, it was encouraging to see some signs of recovery and economic results that were better than earlier forecasts.

"The uplift in consumer spending is a likely result of the commitment to buying local and we are also getting lots of feedback that New Zealanders on holiday spend more in the central retail area than international visitors usually do."

While total tourism spending was down year on year, Wilson said the lack of international tourists was partly offset by an increase in domestic spending.

"It's great to see New Zealanders exploring their own country and supporting the visitor industry and we hope to see that continue throughout the summer."

Wilson said housing continued to be a challenge for the district with the population growing at a much faster rate than housing stock.

"This will remain a priority area of focus for a number of local and central government agencies here."

House price inflation is being sustained by a bottleneck of sellers entering the market, with house sales falling 12 per cent in the September 2020 year but prices rising 14 per cent.

Consumer spending had also recovered but not enough to claw back spending lost in the June 2020 quarter.

Marketview data shows local spending rose 4 per cent per annum in the September quarter, but fell 3.9 per cent in the September 2020 year.

The number of Jobseeker Support recipients rose 26 per cent to 4688 in the September year, which is 37 per cent above the 10-year average of 3416.

The district's unemployment rate has risen from a low of 5.5 per cent in the December 2019 year to 6.4 per cent in the September 2020 year.

At 7.4 per cent, the September 2020 quarter unemployment rate is higher than the annual average and better reflects recent economic performance.

Meanwhile, the Western Bay of Plenty economy has bounced back despite the impacts of Covid-19, which caused widespread business pain and job losses post lockdown.

With Jobseeker Support numbers dropping and a low unemployment rate and a post-lockdown spending boost, local business leaders are confident the region was "in good shape" heading into the new year.

The report showed, nationally, GDP forecasts were dire after lockdown and were expected to reach historical lows.

But those predictions had not come true in the Western Bay, with GDP dropping only 1 per cent in the year ending June and only 1.7 per cent in September.

Priority One has been tracking economic measures monthly since lockdown in April.

Chief executive Nigel Tutt said early signs of job losses and business pain six months ago had been steadily superseded by a rebound in most economic measures.

"We are confident the Western Bay economy is in good shape," he said.

"We were strong going into Covid, and our businesses have shown resilience and ability to adjust to change quickly.

"Consumers are spending, and people are largely employed. For now, the Western Bay is doing well."

Tauranga Chamber of Commerce chief executive Matt Cowley said the Western Bay was doing well, for now.

"Our exporters continue to be in high demand by overseas markets. Many of New Zealand's trading markets are also recovering well, including the primary markets of Australia and China.

"Many businesses are wary of what things may be like this time next year as most governments have exhausted their economic stimulus packages, the risk of future Covid outbreaks, and governments start to focus on paying down debt."

Cowley said the Government and RBNZ's spending since the first lockdown had supported the economy as we all had hoped.

"The country's GDP for this quarter is expected to have almost fully recovered. Many businesses are telling me that they are incredibly busy until well into the new year."

The Staffroom Ltd Tauranga director Jill Cachemaille said there had been steady growth in clients since coming out of lockdown.

"Our clients have continued to recruit new staff for new roles, some have been replacement positions but a lot have been for new jobs.

"I am confident that the new year will bring more opportunities for candidates seeking jobs as typically this would be a busy period. Employers are feeling confident about the economy and responding accordingly."