The economy has remained in the thick of it, with harsh operating conditions in the September quarter, according to Infometrics’ latest monitoring of regional economies.
Despite falling interest rates, business conditions have become complex. Rising unemployment has limited spending and investment by households and businesses alike.
Provisional estimates from the September 2024 Infometrics Quarterly Economic Monitor showed a flat level of economic activity in the September 2024 quarter compared to a year ago, with economic activity over the 12 months to September 2024 also unchanged from the prior year.
“This flat economic result appears stronger than other economic indicators, but different industries and regions are feeling the pinch much more,” said Infometrics Chief Executive and Principal Economist Brad Olsen.
“Provincial and rural areas are feeling the pinch the hardest, with a 0.3 percent and 0.4 percent annual fall in economic activity recorded respectively over the September 2024 year. Metro areas experienced a small, 0.1 percent pa, increase in activity.”
Construction and retail trade were the industries most exposed to higher interest rates and have remained the most brutal hit. Construction activity has been lower than a year ago, and future work is set to remain lower than record highs in recent years.
Residential consent numbers over the 12 months to September 2024 were down nearly 17 percent from a year earlier, and non-residential consent values were down 6.4 percent pa over the same period.
Households have also remained cautious with their wallets, with Marketview card spending data showing a 2.8 percent pa fall in spending in the September quarter.
Personal income tax cuts took effect during the September quarter, and interest rates eased more over the quarter, but the impact of these two changes hasn’t hit the economy immediately.
Olsen added that the primary sector provided some greener shoots, with higher dairy prices, recovering meat prices, and strong horticulture exports.
The current NZD 9.50/kgMS Fonterra milk price ON production levels is set to deliver an NZD 18.1b payout in the 2024/25 season, up NZD 3.4b from the prior season.
Job losses have been hitting nationwide, with a 0.5 percent pa drop in national employment in the September quarter. Job losses have spread further, with 12 of 16 regions showing declines in filled jobs in the September quarter.
“Higher unemployment is set to weigh on household spending until 2025, and until households refix onto lower interest rates now on offer.”
