Although the national economy is still functioning below pre-pandemic levels and the pathway ahead remains uncertain, the economic activity in the September 2020 quarter was stronger than anyone had anticipated. The strength of the bounce back is reason for cautious optimistic celebration as the post-lockdown surge boosted spending levels across various sectors in attempt to make up for lost time.
Regional Economic Activity
The Manawatū economy continues to experience the effects of the COVID-19 pandemic, but not as intensely as the rest of Aotearoa. Infometrics indicated that the region’s Gross Domestic Product (GDP) declined by 1.8% per annum in the September quarter (compared with the September 2019 quarter), while New Zealand’s GDP declined by 3.3%.
The September quarter offers a good picture of the rate of economic recovery in the region. The COVID-19 level 3 and 4 restrictions during the March and June quarters had a similar impact on regional and national economic activity. However, the September quarter data offers a good picture of the rate of economic recovery in the region and shows a significant difference between growth rates for the region and nation.
“Local leaders, businesses, and our communities have shown real strength and resilience to get our economy moving again,” says Malcolm Bailey, Chairperson of the Central Economic Development Agency (CEDA). “Thanks to central government for the rapid deployment of the Support Package, including the significant injection to the Regional Business Partners’ programme, the region’s economy has responded well, and we are on our way to recover, regain and grow.” Bailey adds.
From the beginning of the COVID-19 impacts, it was expected that regions with a large food-based primary sector would weather the economic storm better than those that are highly exposed to international tourism. It is still the case in this quarter. “Food-based primary exports continued to perform well, as overseas markets are increasingly attracted to New Zealand produce thanks to our reputation for high quality produce and food safety standards,” says Stacey Bell, Economist for the Manawatū District Council.
“Export values have held up relatively well because of continued strong demand and increased volumes. Commodity prices for our two largest exports, (dairy and red meat) have fallen in Terms of Trade, meaning the value of goods we export to the goods we import have started to slide downwards. The outlook is for the further softening of red meat prices in particular heading into 2021 due to the decline in restaurant activity in the northern hemisphere,” she explains.
Mark Piper, Director Category, Strategy & Innovation for Fonterra feels that before 2020, health and wellness was an already strong trend and with the global impacts of COVID-19 during this year we have seen the focus on this increase exponentially. “Our diets and exercise regimes are one of the first places people look when thinking about health and wellness. We are fortunate in Manawatū to be a centre for food innovation in NZ, with teams of people right across the region always challenging the boundaries of how we make food better – better for you and a better all-round experience, affecting primary exports positively.” Piper explains.
“While the forecasts remain, the beginning of the roll out of effective vaccines in the UK, US and hopefully Europe, in the coming weeks and the subsequent loosening of economic restrictions, supports a more positive outlook. We will be watching this space,” Bell adds.
The Manawatū region’s economy is resilient, which is reflected in the increase in retail spending this quarter. “The growth rate for spending in the region is well above the growth rate for New Zealand,” says Linda Stewart, CEO of the Central Economic Development Agency (CEDA). “I am proud of how Palmerston North city and the Manawatū district have come together with renewed strength and commitment to support our region, demonstrated by spending locally.”
Marketview’s latest quarterly retail report shows that spending in the Manawatū region increased by 5.6% in the three months ended October 2020 compared by 1.0% increase for New Zealand over the same period. Although the retail spending for the 12 months ended October is down 2.6% from September 2019, it is still a major win for the region in the current environment.
Spending by our residents at local retailers increased by 8.0% from August to October and was the largest contributor to the growth in total spending in the region. Retail spending in Feilding and Sanson grew by 9.6% over the three months to October. The Marketview data indicates that Manawatū residents do more spending locally than the rest of New Zealand.
“Buy local campaigns such as the Choose Manawatū initiative, launched and supported by the Manawatū Chamber of Commerce, Feilding and District Promotion, CEDA, Palmy BID, Palmerston North City Council and Manawatū District Council have seen Kiwis back their local businesses and communities. Being proudly Kiwi and supporting local businesses is paying dividends for our region,” Stewart explains.
Growth in online spending
Manawatū residents spent $38.8 million online in the October 2020 quarter, and the regions online spending increased by 8.2% during the same period, while national online spending declined by 6%.
“It is reassuring to see that September was an incredibly strong quarter for retail activity,” says Stacey Bell, Economist for the Manawatū District Council. “Christmas will be the make or break this year, as it is traditionally the busiest time of year for most retailers in the region. A poor Christmas retail period can have devastating consequences for some retail businesses who are anticipating holiday spending to provide a much-needed lifeline.”
Housing in Manawatū
Quality available housing remains a hot topic right across Aotearoa. The property market is still feeling the pressure of increased demand outstripping supply, driving the house prices to record levels. The housing shortage remains a major challenge and may intensify as Kiwis return from overseas.
“The housing issue is a major risk factor on our region’s ability to attract talent to Manawatū,” explains Sara Towers, Talent and Skills Manager at CEDA. “With a shortage of talent, and a strong infrastructure pipeline underway of million-dollar projects, the number of jobs available will quickly start to outstrip the supply of housing, impacting the ability for companies to recruit talent into the region.”
House price inflation is being sustained by a bottleneck of sellers entering the market. House sales in Manawatū fell 5.6% in the September 2020 quarter compared with the previous year. House prices remain elevated, rising 13% per annum in the September 2020 quarter, outpacing nationwide house price growth of 8.0% but down from a recent high of 17% in the September 2019 quarter.
We are not sitting idle on the housing challenge however, with residential consents growing 12% in the September 2020 year on the back of a particularly strong June 2020 quarter. At $193.7m in the September 2020 year, non-residential consents are at unprecedented levels, reflecting the significant pipeline of catalyst investment projects and the flood of commercial builds underway.
According to Peter Crawford, Economic Policy Advisor for the Palmerston North City Council our region is outperforming the other regions with an increase of 133% in non-residential consents compared to September 2019.
“This is even more significant when we compare our region to the rest of New Zealand with the national consent values declining by 8% per annum for September 2020,” says Crawford
Job Seeker Support
The number of people in the region registered for the MSD Job Seekers benefit increased by 22% in September 2020 from September 2019, while the number in New Zealand increased by 43% – nearly double that of our region.
Latest data indicates that jobseeker beneficiaries in the region are starting to decline with the number of recipients falling by 188 (-4.1%) since the August peak. Reflecting the ongoing recovery of the New Zealand economy, national Jobseekers are also in decline, falling by almost 12,000 (-5.4%) since August. The improving outlook for 2021 due to reduced border restrictions, is expected to create further employment opportunities and support a further reduction in Jobseeker beneficiaries.
Tourism spending in the Manawatū region in the September quarter was $113 million, a decline of 2.7% from the September 2019 quarter. Total tourism spending in New Zealand declined by 17.5%.
Domestic visitor spending in the region declined 9.3% in the year ended September 2020 but increased by 2.7% in the September quarter.
Spending in Palmerston North increased in July but declined during August and September due to COVID-19 Alter Level 3 and 2 restrictions introduced in August which had significant ripple effects across New Zealand.
This resulted in events in the city being cancelled, including the national secondary school basketball tournament which in 2019, according to PNCC (Palmerston North City Council) Economist Peter Crawford, was estimated to contribute $800,000 to the city’s GDP.
Population of the Manawatū Region
It is estimated that the population of the region reached 122,500 as at June 2020.
Contribution to the population growth for the Manawatū region came from:
- 580 people from natural population growth (the difference between the number of births and deaths),
- net international migration of 1,170 people, and
- a net loss of 40 people from internal migration within New Zealand.
The strongest rate of population growth in the region was in the 65 years and over age group, which increased by 2.7% between 2019 and 2020. The weakest growth was in the
40 – 64-year age group, which increased by 1.1% in the last year.
“This data supports future developments for more retirement villages, and which again compounds the housing supply trend together with the need for efficient health care,” says Stewart.
Employees and Salaries
Statistics New Zealand’s latest wage data shows a wage growth of 7.3% in the Manawatū region in the September quarter from September 2019 while the New Zealand growth in salaries and wages was only 5.6%. “That’s a key factor in the strong growth in consumer spending we are seeing,” says Crawford. “Another key factor is the 2,590 more jobs that is in the region in September 2020 compared with September 2019, an increase of 4.6%, while the national jobs growth was only 0.2%,” Crawford explains.
Economic Outlook for the future
“Events activity from March this year was significantly impacted by COVID-19 restrictions, during our traditional peak season. If we manage to remain at Alert Level 1 through summer and autumn, we can expect to see strong growth in domestic visitor spending in 2021,” Crawford says optimistically.
“Manawatū is geared for growth and recovery. Capital projects and investments from central and local government and a significant construction pipeline further support the recovery of our region, along with our resilient primary sector and connected business community. 2021 is looking bright, and we will come back stronger than before” Stewart concludes.
Please find the full reports, below.