Although the national economy is still functioning below pre-pandemic levels and the road ahead remains uncertain, the economic activity in the September 2020 quarter was stronger than anyone had anticipated.
The Manawatū economy continues to experience the impact of the effects of the COVID-19 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,” says Linda Stewart, CEO of the Central Economic Development Agency (CEDA). “The COVID-19 level 3 and 4 restrictions during the first and second quarters had a similar impact on regional and national economies, while the third quarter data shows a significant difference between growth rates for the region and the rest of New Zealand.”
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 highly exposed to international tourism. It is still the case in the September quarter says Stacey Bell, Economist for the Manawatū District Council. “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.”
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.
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,” Bell 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,” she 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 Stewart, who is proud of how Palmerston North city and the Manawatū district have come together with renewed strength and commitment to support our region, demonstrated by strong spending locally.”
“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.
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%.
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 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.”
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.
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.