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Positive economic numbers won’t last

Covid Recovery

Keith Newman27 May 2020

Provisional estimates for the Hawke’s Bay region indicate we started the year with higher GDP growth than the national average, but the harsh reality of the Covid crisis is yet to hit.

Infometrics believes we’ll come in around 2.4% growth for the March quarter compared with 1.7% nationally, continuing the pre-Covid trend that saw Hawke’s Bay’s outperforming the rest of the country.

However it warns we’re likely to see GDP fall 6.3% in the March 2021 year, which is still fairly robust compared with the overall prediction of an 8.0% fall expected nationally.

Our saving grace will continue to be the strong primary sector foundation underpinning the local economy.

The latest numbers might appear to take the sting out of the cascade of more concerning trends. However, reporting what is essentially past performance can’t be a true indication of what’s ahead after two months of lockdown, with no clarity about business as usual looks like.

The high numbers being reported for the March 2020 year reflects the tail end of the local business and tourism boom;$674 million, up 3.1% on 2019 for tourism and robust retail spending before lockdown.

This was a time when house price inflation was “buoyant with growth nearly double that of the national average”; up 10.5% in the March 2020 quarter compared to 5.9% nationally, and a dairy pay-out forecast for the 2019-20 season of a healthy $131 million.

Regional unemployment is now at 4.5%, well below the 10-year peak compared to 4.1% nationally, with credit and debit card spending on retail purchases up 7% (nationally 3%).

Employment is expected to decline 8.2%, with the loss of an estimated 7,000 jobs, compared with a 9.8% fall nationally, and unemployment is set to rise to 8.3% compared with a national rate of 9.0%.

Infometrics says building consents in Hawke’s Bay are a source of optimism for construction. The number of new dwelling residential consents was up an extraordinary 43.9% compared with 9.0% nationally, and the value of non-residential consents grew by 21.2% while the rest of the country declined -0.4% on average.

“Assuming these consents translate into building work, this should help support the local construction industry through the downturn,” reports Infometrics.

Food production and processing should be less affected by the pandemic than some sectors, but social distancing will lower food production, and farmers are facing their own challenges, including extreme drought, environmental compliance, and banks’ reluctance to extend credit to the primary sector.

Both international tourism and education will experience steep declines until our borders reopen. Infometrics expects large falls in car and commercial vehicle registrations, consumer spending, and house sales in the June 2020 quarter, with the effects rippling through the regional economy for several quarters to come.

Hawke’s Bay economic performance over recent quarters:

Economic measure

(all 12 months, unless stated)

Mar

‘20

Dec ‘19 Sept ‘19 June ‘19 Mar

‘19

Dec

‘18

Provisional Gross Domestic Product 2.4% 3.6% 2.9% 3.0% 3.2% 3.2%
Unemployment rate 4.5% 4.4% 4.6% 4.4% 4.3% 4.3%
Jobseekers 5,466 5,198 5,074 4,998 4,917 4,825
Consumer spending (quarter) $538m $577m $480m $498m $506m $546m

 

 

 

Keith Newman27 May 2020

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