11 April 2022
The unemployment rate remains low across the country this quarter, falling to a record 3.2%. Despite this, employment growth varied across the regions, ranging from a 5.4% annual increase in Northland to a 5.1% annual decrease in Gisborne.
Meanwhile, wages continued to rise for the three months ending December 2021, with 2.8% annual wage growth across the country - the biggest uplift in more than a decade with stronger growth to come. Construction followed suit with 24% annual growth nationally. Northland and Taranaki recorded the largest construction increases driven by significant increases in non-residential projects across both regions.
ASB chief economist Nick Tuffley warns while these results for Q4 are promising, economic headwinds are coming.
"The tight labour market suggests we've now reached the maximum level of sustainable employment growth and we are likely to see job growth starting to slow down in 2022. We've also seen impressive wage growth over the past 12 months, with scope for further acceleration this year. However, in the short-term, rising inflation means real wages for most households will go backwards and, as a result, consumer spending power will take a temporary hit."
"Looking at the construction sector, a large pipeline of work across the country contributed to substantial regional growth, however this sector is constrained by continuing material and labour shortages. Increasing interest rates and soft net migration will also have an impact in the long term."
After a sharp decline during Q3, retail sales across the country have mostly recovered this quarter following the easing of COVID-19 restrictions across the country.
"The past eight months have been tough for retailers, with the majority of the country facing heightened COVID restrictions of some kind since August last year. It's certainly been hardest on those in Auckland with lockdowns limiting trade the longest. The good news is spending has bounced back this quarter as we've recorded a 7.3% annual increase nationally," says Mr Tuffley.
"As we continue to move through our COVID recovery, and with Auckland now enjoying greater freedoms under the traffic light system, we are expecting retail spending to continue picking up in 2022. Although we could see factors such as rising inflation and fuel prices tempering household spending in the coming months."
The scoreboard ranks regions based on their annual growth across a range of measures including employment, retail sales and building consents.
Another strong performance from Canterbury this quarter sees the region hold onto its crown for the second consecutive quarter, with annual house price growth up 36% - almost 10% higher than the national average. Top five results across employment, construction, retail trade and consumer confidence also contributed to the region's strong position.
Canterbury saw strong competition from Manawatū-Whanganui and Northland, both recording solid growth and retaining their second and third positions respectively for another consecutive quarter. Mr Tuffley says it's hard to pinpoint what's contributing to these consistent results, but the diversification of these regions is likely having an impact.
"There is no single factor we can point to that explains the consistent high rankings of these regions. To date, we are seeing a tendency for well-diversified provincial and pastoral regions to fare better from the disruption created by the pandemic with Canterbury, Manawatū-Whanganui and Northland all falling under this category."
Manawatu-Whanganui maintains its solid second place position, off the back of continued strong growth all round.
Mr Tuffley says Manawatū-Whanganui is the only region this quarter to equal or outperform national averages across all the metrics we measure, with the region second in New Zealand for employment growth and new car sales while also ranking third on the scoreboard for construction growth.
"It will be interesting to see if this region can lift further up the rankings, given how well it's performed across-the-board recently," says Mr Tuffley.
Now sitting just behind the top three regions, Taranaki jumps from 13th place on the scoreboard to fourth, with the region recording an impressive 140% annual uplift in construction.
Mr Tuffley says a significant jump in non-residential building consents has been a winner for the region.
"Taranaki recorded an incredible five-fold increase in non-residential building consents, which has seen the region soaring above the national average for Q4 with this growth largely driven by a sizable construction project gaining consent last October," says Mr Tuffley.
The region has also seen consistent annual growth in house prices with this figure now up 29%.
While retail spending and consumer confidence remained low in Taranaki, Mr Tuffley says the region is also expected to benefit from bumper milk prices.
The full ASB Regional Economic Scoreboard, along with other recent ASB reports covering a range of commentary, can be accessed at our ASB Economic Insights page: https://www.asb.co.nz/documents/economic-insights.html