Economic Monitor: November 2021
Dot Loves Data’s Business Resilience Index (Bizmomento) to November 2021 shows that New Zealand’s broader economy remains stable, largely underpinned by low levels of unemployment, an influx of government money via the wage subsidy and Covid-resurgence payments, and a resurgent primary sector. There are some potential downside risks however, with the full impact of the extended Auckland lockdown likely to impact hundreds of businesses and the future ceasing of the wage subsidy, which may take some businesses off their current life support.
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 (latest update includes data to 30 April 2021). We use data from the New Zealand Companies Office Register, DOT’s business bureau and Eftpos NZ consumer spending transactions to measure business openings, business closures, longevity of businesses and consumer demand. We compare this against historical data to forecast the net growth of businesses over the next 12 months.
New Zealand is currently sitting at resilience level 5, showing reasonable levels of resilience and up from a sharp dip to level 3 in January 2021, which was caused by an increase in business closures at the conclusion of the wage subsidy scheme in the third quarter of 2020.
August 2021 saw another large spike in business closures, but this was balanced by a large increase in ‘lockdown business openings’, when 15,000 new businesses were opened and another 12,000 in September 2021.
Government Director Justin Lester said: “We have moved into a two-tiered economy where construction, digital, advisory and primary sectors are performing strongly, but we’re still seeing weakness in tourism, retail, accommodation, events, hiring and sectors associated with this group. Construction is patchy. The sector is booming, with high levels of demand and strong growth in new businesses and sole traders, but higher costs due to materials delays and price escalation means those on fixed price contracts are hurting somewhat. As Auckland moves out of lockdown we will closely monitor how businesses perform and what consumers do. We expect a spending splurge over Christmas. We hope it will continue over summer as the economy opens up further.”
There was a sharp spike in the number of business closures during August 2021 (9524), but this dropped back to a steadier level of 3399 in September and 3478 in October.
Separately, there was also a significant increase in business openings in August 2021 (14,943), which reflected many people exploring new endeavours while many could not work during lockdown. Others have indicated they were initiating a ‘Plan B’ due to an uncertain lockdown environment and questions about whether they could return to their jobs. September openings were similarly large at 12,369 and October dropped back to 6695.
The Auckland lockdown will take a toll on the city’s prospects in coming months and we expect to see businesses coming under stress when the wage subsidy ceases. Currently the Auckland region remains at resilience level 5 because of the large number of new business openings in August and September. However, the Waitemata Local Board Area, which includes the Auckland CBD, sits at Level 3 due to the steep decline in CBD consumer spending.
Auckland business openings remained strong between August - October, despite the impact of lockdown, but unemployment levels also increased with an additional 2,265 Aucklanders on an unemployment benefit in September 2021 compared with the June quarter.
Total Auckland consumer spending was also down by more than 50% during the month of September, with many retail businesses relying on the wage subsidy to survive.
The Wellington region sits at resilience level 5. Over the last three months 1,092 businesses closed and 695 opened. Employment levels remain strong in Wellington, with unemployment at its lowest level since March 2020.
Over the last three months 1,352 businesses closed and 879 opened. Employment levels remain strong in Christchurch in particular, with unemployment continuing to decline since its peak of 32,478 in December 2020 to 29,304, a reduction of 3,174.
While there continue to be local reports of business operators doing it tough in Queenstown, this hasn’t yet translated into significant numbers of business closures. 167 local businesses closed in the last three months, while 103 opened.