Economic activity remained finely balanced at the start of 2023, with a strong labour market, rising interest rates, and weather disruptions all significant influences on a cautious but still robust start to 2023.
Infometrics’ March 2023 Quarterly Economic Monitor showed a 2.7 percent per annum rise in provisional economic activity in the March 2023 quarter, although several indicators signalled a more challenging economic outlook.
“Our preliminary assessment of the first few months of 2023 suggests that New Zealand might have narrowly avoided a recession, so far, at least, with our initial estimate showing a small quarterly increase in economic activity after a weaker end to 2022,” said Infometrics Chief Executive and Principal Economist Brad Olsen.
The rebound in international tourism has continued to bolster economic growth figures in several regional economies, including Otago, Canterbury, and Auckland.
“This result continues a trend from recent quarters, as tourist arrivals have recovered to two-thirds of pre-pandemic levels, and guest nights have risen by 52 percent per annum on average over the last 12 months.”
However, Infometrics’ regional economic assessment also showed the hit to local economies from Cyclone Gabrielle and other weather events throughout the first few months of 2023.
“Economic activity in Hawke’s Bay, Tairawhiti, Northland, and Coromandel fell as horticulture production was destroyed, meat and dairy processing was disrupted, and transport infrastructure was severely damaged.”
Olson explained that despite solid nationwide economic activity growth of 2.7 percent per annum, Hawke’s Bay, Tairawhiti, and Northland saw economic activity decrease by 0.7 percent and 0.8 percent from a year ago.
Nevertheless, Olson commented that the current resilience of the economy was remarkable.
Various indicators across households and businesses showed activity has swiftly regained momentum after recent weather events, which was encouraging.
“Higher-frequency indicators show a swift rebound in most parts of the economy in weather-affected economies in the March month, reinforcing the level of resilience locally as businesses, households, and local agencies got stuck into recovery actions.”
Across the broader economy, accelerating population growth has improved the labour supply, which has supported solid spending activity. Olson stated that job growth remained buoyant.
Waikato, the top of the South Island, Canterbury, and Otago all registered filled jobs growth of three percent per annum or more in the March 2023 quarter. This growth has demonstrated the continued hiring levels occurring in the economy, although intentions around future job hiring showed a rising level of caution from businesses.
“Higher interest rates haven’t fully hit households yet, and economic sentiment remains subdued, laying a pathway for slowing economic momentum over 2023 as a more challenging environment emerges.”
