There is little sign of a decline in spending despite rising interest rates, the latest quarterly review has found. Photo: 123RF
Economic activity has remained elevated in the third quarter of the year, driven by stronger tourism activity and solid household spending.
Infometrics' latest Quarterly Economic Monitor showed a 2.6 percent rise in annual provisional economic activity for the 12 months to September, with a 5.4 percent rise in quarterly economic activity.
While the latest survey compares with the Covid-19 lockdown the year earlier, it revealed there has been strong regional growth, particularly in South Island areas and Auckland.
"Solid regional economic performances in 2022 reinforce our view that local economies across New Zealand are well-positioned at present, ahead of two years of stunted growth in 2023 and 2024 as we try to wrestle inflation back under control," Infometrics principal economist Brad Olsen said.
"A number of North Island economies have seen more restrained growth as a result of capacity constraints hitting, but continue to see the strongest levels of economic activity compared to pre-pandemic times."
The recovery of international tourism continued, with more tourist arrivals, strong tourism expenditure, and more guest nights.
"Tourism activity has come back stronger than first expected, with high Australian traveller numbers bolstering activity over the winter season, and strong inbound travel from North America too," he said.
"However, questions remain over how New Zealand will find the resources to support a strong summer of tourism given existing workforce and capacity challenges."
While tourists are returning in high numbers, there is concern over how the tourism sector will fare during the peak of summer. Photo: 123RF
The report indicated employment remained strong, with employment and labour force participation rates rising to their highest level ever in the September 2022 quarter.
"Filled jobs numbers from monthly tax filings look to have risen 3.1 percent per annum over the 12 months to September 2022, although quarterly growth of 2.6 percent per annum shows that the pace of job additions is slowing as the unemployment rate remains at a near record low," Olsen said.
Jobs growth was strongest in Tasman, Canterbury and Bay of Plenty.
"Having people in employment and earning a living provides a solid platform for the future," he said.
While spending had remained elevated, it was effectively flat once inflation was factored in.
"There is little sign of falling spending, even in the face of rising interest rates that will be squeezing household budgets into 2023," Olsen said.
"Strong September results point to solid economic foundations, but also underscore the difficulty of taming inflation in a strongly growing economy, and ahead of a likely spending crunch in 2023 as inflation-fighting efforts hit households."