Manawatū’s economic activity has been strong over the year to June 2022 when compared to the national data. Highlights from the quarter include strengths in the dairy sector, consumer spending and record levels of employment. On the flip side, tight labour market conditions are presenting challenges for local businesses, who are continuing to face labour shortages, and supply chain issues across many sectors.
CEDA’s Chief Executive Jerry Shearman acknowledges that businesses continue to operate in challenging times.
“Businesses face many challenges which are being compounded by staff wellness and changing trends in relation to staff retention and attraction, within the tight labour market.
“Our team continues to work closely with local businesses to support business planning, capability development, and connecting them to opportunities, tools and resources to help them succeed,” says Shearman.
While inflation is the highest it’s been in 32 years and the rising cost of living, the strong investment pipeline and continued GDP growth do give some positives to our economic outlook.
Manawatū’s economy shows continued strength, with an estimated increase of 2.2% for the year to June 2022, compared to a year earlier. This is in comparison to a national GDP growth of 0.9%.
The local economy has performed well relative to much of New Zealand due to high levels of public and private investment, strong global demand alongside high prices for goods produced in the region, and elevated jobs and earnings growth. The diversity of the regional economy has also meant that economic performance has been less affected by border closures than many other parts of New Zealand.
Stacey Bell, City Economist at Palmerston North City Council says, “These factors have helped to sustain living standards across the region in a time of heavily constrained supply and rapidly rising costs. This has maintained levels of spending relative to many other parts of New Zealand. This in turn, has supported local businesses and helped to protect local jobs.
“That’s not to say that our businesses and families are not doing it tough, and the challenges are set to continue for a while yet, but there is light at the end of the tunnel. The Reserve Bank expects inflation to return to the top of their target range in the June 2024 quarter, with the official cash rate forecast to peak at around 4% in the June 2023 quarter,” says Bell.
The region’s economy also continues to be bolstered by unprecedented investment flowing into the region, boosting the strength of some of our largest growth industries. The distribution and logistics sector has grown by 80.8% over the period during the last 20 years compared with just 49.8% across New Zealand.
The establishment of Te Utanganui (Central New Zealand Distribution Hub), is estimated to directly generate 3,000 additional jobs over the next 30 years. This investment will also generate employment across the wider economy, driving further income growth and supporting regional economic performance over the longer term.
A strong dairy sector is helping to support the Manawatū region, providing continual income to sustain the economy over the short and long term. The estimated dairy payout for the 2021/22 season is sitting $69 million higher than the previous season.
The dairy sector has performed well off the back of sustained global demand and weak global supply, driving commodity prices higher and increasing returns to the sector over the duration of the pandemic. Dairy production has contributed substantially to the strong economic performance of the region in a time when other sectors have been hit hard by border closures and COVID-19 restrictions. This has supported levels of spending and employment across the regional economy.
Despite escalating costs placing pressure on the sector, dairy prices are expected to remain high due to the continuation of weak global supply. This will support economic activity across the region into the 2022/23 season.
Consumer spending in Manawatū has been very strong over the year to June 2022, with data from Marketview showing consumer spending up 3.4% year on year. In contrast, consumer spending across New Zealand didn’t grow.
Data from CEDA’s recent Quarterly Retail Report shows annual electronic retail spending in the region at $1,637 million, increased by 3.4% from 2021.
The largest sectors for spending in the region in the year ending June 2022 were:
- Groceries and liquor – $577 million (7.8% increase)
- Home and recreational retail – $435 million (2.6% decrease)
- Fuel and automotive – $287 million. Sector with the highest annual increase (18.9%) compared to year before
- Cafes, restaurants, bars and takeaways – $188 million (5.9% decrease)
Amanda Linsley, Chief Executive, Manawatū Business Chamber says, retail spend across the region gives us a good indication of how consumer spend is changing in response to the economic climate.
“When the cost of groceries and fuel are high, this impacts on discretionary spend which results in the decrease we are seeing in home and recreational spend, as well as hospitality in cafes, bars, restaurants and takeaways. From a business perspective, this only adds to the current challenges and pressure our business community are facing.”
To help support these front line sectors, CEDA and the Manawatū Business Chamber delivered a ‘Get Local’ campaign across the June quarter to encourage our residents to shop, spend and experience local to support our front-line businesses and keep their dollars in the region where possible.
The labour market in Manawatū has also been strong over the past year. Employment for Manawatū residents grew by 2.8% in the year to June 2022. Over the past year, the unemployment rate has averaged 2.6%, well below the national average of 3.3%, and is the lowest unemployment rate on record for our region. However, on balance this alludes to recent pay increases rising to record growth levels influenced by a tight labour market and borders re-opening.
Tourism expenditure in Manawatū was down 0.3% over the year to June 2022 compared with a decline of 6.6% nationally. This is a strong result for the region over a period where lockdowns and COVID-19 restrictions impacted on tourism and events activity both here, and across the country. The resurgence of events in the region signals the recovery of the sector with delegate days in the June quarter exceeding the previous three quarters.
CEDA’s Destination Development Project Manager Janet Reynolds says, “Compared with the national drop, we’re doing relatively well thanks to our largely domestic visitor market, meaning we’ve not been as badly affected by the pandemic as other regions.
“We’re looking forward to a stronger spring and summer season, especially as events are now coming back to life after restrictions continue to ease and we have some exciting campaign activity planned for the coming months to inspire and engage with existing and potential visitors,” Reynolds says.
A total of 158 new residential building consents were issued in Manawatū in the June 2022 quarter, compared with 216 in the same quarter last year.
On an annual basis the number of consents in Manawatū decreased by 9.1% compared with the same 12-month period a year before. This compares with an increase of 14.4% in New Zealand over the same period.
Dwelling consents in the region peaked earlier than for many parts of the country with a record 817 new dwellings consented over the year to December 2021. While the number of new dwelling consents has fallen, dwelling consents to June 2022 remain at five-year average levels with 656 new dwellings consented over the year.
Non-residential building consents to the value of $194.7 million were issued in Manawatū during the year to June 2022.
The value of consents in Manawatū decreased by 3.8% over the year to June 2022, compared to a year earlier. In comparison, the value of consents increased by 15.8% in New Zealand over the same period.
This drop isn’t alarming considering that in the year to December 2021, consents in Manawatū reached a 10-year peak of $255 million so our base is high.
Bell says, “With record levels of investment signalled for the region to 2035, the expectation is that consent values will strengthen as supply side constraints reduce over time.”
As in the previous quarter, average house values in Manawatū still rose – up by 3% in June 2022, compared to the previous year. This compares with 9.6% growth in house prices nationally over the year.
Near term data tells a different story with house prices in both Palmerston North City and Manawatū District falling from their peaks earlier in the year. In Palmerston North, average house prices retreated by 6.1% in August from the January peak of $754,212 while Manawatū District average house prices fell by 6.9% from February when house prices reached $694,298.
The softening of house prices alongside rising household incomes in the region is delivering a positive outcome. Housing affordability is increasing across the region.
Housing affordability in the city improved from 7.1 times the average household income in December 2021 to 6.6 times the average household income in June 2022, while affordability in the Manawatū District improved from 6.3 times the average household income to 6.0 times the average household income. This compares with 8.5 times the average household income for New Zealand.