25 March 2021
DOT Loves Data’s Business Resilience Index (Bizmomento) shows that while New Zealand has weathered the Covid-19 storm so far, performance in 2021 and 2022 still remains very uncertain.
Businesses rebounded strongly in the second half of 2020, which came off a very weak first half of 2020. The wave of money that flowed into the economy via the wage subsidy helped stabilise companies in the second half of 2020, but our business resilience analysis, which aggregates measures relating to business growth rates, openings/closures, stability and consumer demand, indicates the current business cycle looks to have reached its peak and is currently trending downwards.
DOT Loves Data’s business resilience index assigns a resilience measure from 1 (low resilience) to 7 (high resilience) and tracks New Zealand national and regional performance from January 2001 to today. If we look back, New Zealand performed strongly from January 2001 until October 2007, but nosedived from October 2007 until December 2008. While some confidence was restored between January 2009 to December 2010, the economy tracked sideways and then into a second dip meaning the bottom of the GFC cycle was not reached until November 2011, three years after the GFC first commenced.
Despite the immediate impact of the Covid lockdown in March 2020, this time around companies were able to maintain confidence until October 2020. Since then we have seen a quick tapering in confidence and an increase in business closures. As to what the future holds, if borders are able to open and supply chains can be restored, we may see improvements, but continuing lockdowns or disruption to international supply chains will create additional headwinds.”
Despite the obvious impacts on Auckland’s international tourists and the numbing effect of lockdowns on Auckland CBD, the Auckland region remains at a resilience index level of 4, higher than Wellington and Christchurch, due to the net number of businesses increasing by 4.6% between February 2020 and February 2021. A lead indicator for future performance is the level of customer engagement, which has weakened in Auckland by 24.9%. This indicates that there will be more business closures in coming months, which will negatively impact business resilience.
Wellington & Christchurch
Wellington and Christchurch both sit at a resilience index of 3, Wellington since September 2020 and Christchurch since January 2021. Between February 2020 and February 2021 the net number of Wellington businesses increased by 0.9% and in Christchurch by 2.1%.
Queenstown businesses are also holding tough and maintained a business resilience level of 4, possibly helped by a range of government initiatives targeted to support Queenstown, including $85m for a town centre redevelopment, DOC concession fees for tourism businesses, local events funding, wage subsidies and funding from the tourism recovery package for large-scale Queenstown businesses. However, ongoing consumer weakness in Queenstown points strongly to future business closures, which is evidenced by a 38.1% decline in customer engagement between February 2020 and February 2021.
Where is business resilience strongest and weakest?
The strongest business resilience is currently displayed in Gisborne, Wairoa and Opotiki, which are underpinned by reasonable net business growth, fewer business closures and more stable consumer demand.
The weakest resilience levels are recorded in Kaikoura, Hurunui, Waitomo and Rangitikei.