Is New Zealand Economy On The Way Up? – Scoop

Summary

After a year riddled withturmoil and uncertainty, New Zealand seems to have entered2022 with a relatively better outlook. An improvement inleading economic indicators suggests that the Kiwiland maysee better times ahead as recovery is on the way. The recentrevival in major economic indicators has provided somerespite from the dismal scenario seen last year after theDelta variant caused global wreckage. In a way, the economyhas much to look forward to in the new year.

NewZealand has set a global example in curtailing the spread ofthe COVID-19 pandemic. The countrys stringent measuresagainst the virus helped it stand back on its feet followingthe 2020 recession. However, soon after, the Delta variantunfolded rapidly, causing major unrest in Auckland. Theresult was a slowdown in business activities, which opened anew can of worms for retail, manufacturing, travel, andconstruction sectors.

However, the central banksdecision to increase interest rates came perfectly timed,prompting a cool off in the overheated economy. With severaleconomic indicators suggesting a gradual recovery, furtherrate hikes can be expected in the monthsahead.

Against this backdrop, let us discuss some keymarket trends reflecting the resilience of the NZeconomy.

November 2021 was a month packed withpromising market forces, the most prominent being rise inemployment numbers. As per Stats NZ, the number of filledjobs rose 0.4% month-on-month in November, representing anaddition of 9,395 jobs. The substantial increase in jobs wasseen in the construction sector and professional, scientific& technical services domain, where jobs surged by 8.6%and 8.2%, respectively.

A major chunk of these newlyfilled positions belonged to Auckland residents, where thenumber of filled jobs increased by 4.7% relative to November2020. Moreover, the Bay of Plenty recorded the largestyearly jump of 4.9% in the number of filledjobs.

Notably, the ANZ monthly economic indicator alsohinted at the sharp recovery of the countrys labourmarket from pandemic-induced disruptions. The InfometricsMonthly Employment indicator suggested thehigher-than-expected resilience at the tail end of prolongedDelta restrictions and indicated earnings rising at thefastest pace on record. The rise in wages can be credited tothe additional bargaining power achieved by the workersamidst the lack of a skilled workforce.

Supplyconstraints have sent property prices to new all-time highsover the last one and a half years, urging many to take atimely exit from the market. However, the latest reportssuggest that new dwellings have risen at a record-breakingrate in New Zealand. Stats NZ reported that new dwellingsconsented finally rose by 0.6% in November 2021, afterdecreasing by 2.1% in October. Relative to November 2020,new dwellings consented surged by 26% to 48,522dwellings.

Notably, 2,126 new stand-alone housesconsented in November alone. Additionally, Canterbury sawthe sharpest hike of 30% in new dwellingsconsented.

The rising work-from-home culture hasredefined how people view their housing needs. The demandsurge has created space for multi-unit homes like townhousesand apartments, which can accommodate many homebuyerswithout compromising on private space.

Apart fromincreased residential housing needs, the previous year alsoenhanced the requirement for sufficient equipment and estatefor the healthcare sector. Among non-residential buildings,hospitals and nursing homes saw the biggest spike in newdwelling consents.

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As per Stats NZ, New Zealanders spent anadditional NZ$543 million in the retail industries inNovember 2021 alone, compared to October. The momentumcontinued in late December and early January when shoppersflocked the markets for holiday celebrations.

Retailsales are generally the earliest to spike with increasingconsumer confidence in the economy. As soon as restrictionseased, consumers crowded the markets, cooling off somepent-up demand for goods and services. Additionally, theholiday season added to the consumer frenzy, providing theperfect setup for consumers to relieve their long-builtdemand.

The period between year-end and New year wasmarked with heavy core retail sales, which broke recordsseen in pre-Covid times. Thus, the markets are experiencingbooming demand, with shoppers quenching their longstandingneeds to buy consumer goods.

The NZ economy seemswell-positioned to take on any additional challenges ahead.A slowdown in economic activity could seep in because of thefast-spreading Omicron variant. However, buoyant demand islikely to keep the businesses afloat and prevent anyunprecedented havoc in the economy.

GOOD READ: WorldInequality Report2022

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Is New Zealand Economy On The Way Up? - Scoop