Job growth fell in seven of the 16 regions, and significantly in Tai Rāwhiti Gisborne Photo: RNZ / Tom Kitchin
New Zealand's economic crunch is deepening and things are likely to get worse before they get better, a new report suggests - but the effect of the downturn hasn't been felt evenly across the country.
Infometrics has released its latest quarterly economic monitor, which indicates that economic activity in the June quarter was 0.2 percent per annum lower than a year ago, turning year-end activity into a fall of -0.2 percent.
"The economy is clearly weaker, with households tightening their belts as unemployment rises and job security deteriorates. Businesses are reporting lower sales and limiting further hiring," said Infometrics chief executive Brad Olsen.
"Economic sentiment remains poor, with the private sector struggling, even as population-driven growth in sectors such as health and education keeps headline numbers looking less downbeat than many are feeling."
The report showed that jobs growth had increased more than 1 percent in Otago and Canterbury but had been flat or falling elsewhere.
It had fallen in seven of the 16 regions, and significantly in Tai Rāwhiti Gisborne, where there was a 1.2 percent per annum fall in filled jobs. That was followed by Taranaki, with a 0.6 percent fall, and Wellington and Nelson, with 0.4 percent, drops.
Brad Olsen of Infometrics. Photo: RNZ / Samuel Rillstone
Olsen said the crunch was deepening and broadening.
"It highlights the difficulty emerging. You hear stories and are now starting to see challenges coming through more clearly in the numbers, especially the downturn in manufacturing, retail, construction and professional services."
He said the economy was deteriorating as 2024 progressed.
But the effect was mixed around the country.
"The mid to lower North Island is in decline, the mid-upper North Island solid enough and then the upper North Island is again constrained. Long story short, that is a lot more driven by some of those previous trends in terms of tourism still getting back on its feet."
He said the effect of softening interest rates would take time to run through the economy.
"There's talk of interest rates starting to be cut and will that stimulate a bunch of economic sentiment and turn the economy around… maybe. At the moment unemployment is going to get worse before it gets better."
He said households might feel rates come down but then have to grapple with rising unemployment and worries about job security.
"That will have a much more real effect on activity over the next six to nine months. It may take until next year before better economic trends start to emerge."
He said although there were signs of improvement for the primary sector, rural parts of the country had been heavily affected. Employment growth on average over the 12 months to June 2024 has been strongest in metro areas, up 2.4 per cent. Provincial areas had growth of 1.8 percent, while rural areas recorded just 0.7 percent.
"We're seeing metro areas, generally the cities, having seen much stronger job growth over the last year. The provincial areas are more restrained and rural quite weak.
"It highlights very different drivers in different parts of the economy."
Households would have different experiences, too.
"Look at the likes of some rural areas that have less intense job growth in recent times, it means people are going to be finding it tougher to find roles in those areas. There's a bit more flux in the system, when it comes to the metros even though it will differ depending on where you are."
He said spending had slowed markedly in the June quarter.
"Although it's encouraging to see inflation having slowed to 3.3 percent in the June quarter, this inflation rate still far outstrips growth in card spending, meaning households are buying less overall. This trend, coupled with continued population growth, further highlights the downturn in per-person spending, as Kiwis keep a tighter hold of their wallets," Olsen said.