New data from Infometrics highlights stagnant economic activity and rising unemployment
Despite falling interest rates, regional economies across New Zealand faced stagnant growth in the September 2024 quarter, according to Infometrics’ latest Quarterly Economic Monitor.
Economic activity remained unchanged compared to the previous year, and over the 12 months to September, growth also showed no improvement.
“This flat economic result at first glance appears stronger than other economic indicators are showing,” said Infometrics chief executive Brad Olsen (pictured above). “But different industries and regions are feeling the pinch much more.”
Provincial and rural areas saw annual economic declines of 0.3% and 0.4%, respectively, while metropolitan areas recorded a marginal 0.1% increase in activity.
Construction and retail hit hard by higher rates
The construction and retail sectors remain the most impacted by higher interest rates.
Construction activity declined compared to last year, with residential consent numbers down nearly 17% and non-residential consent values dropping by 6.4% over the same period.
“Construction activity is lower than a year ago, and future work is set to remain lower than the record highs seen in recent years,” Olsen said.
Retail spending also took a hit, with Marketview data revealing a 2.8% drop in card spending during the September quarter. While personal income tax cuts and easing interest rates were introduced, their economic impact has yet to materialise.
Primary sector provides hope amid challenges
Some positive news comes from the primary sector. Dairy prices have strengthened, meat prices are recovering, and horticulture exports remain robust.
“The current $9.50/kgMS Fonterra milk price is set to deliver an $18.1b payout in the 2024/25 season, up $3.4b from the prior season,” Olsen said.
Rising unemployment damps spending
Job losses are widespread, with national employment falling 0.5% in the September quarter. Declines were recorded in 12 of 16 regions, further straining household spending.
“Higher unemployment is set to weigh on household spending until 2025, and until households refix onto lower interest rates now on offer,” Olsen said.
While certain sectors show resilience, regional economies face significant challenges, with rising unemployment and sectoral slowdowns weighing heavily on recovery prospects, the Infometrics report showed.
Read the Infometrics media release here. Also see the Quarterly Economic Monitor for more details.
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