Canterbury attracting new businesses as optimism grows

Tuesday, 29 October 2024

The OCR cut and dip in inflation are not just good for businesses, they’re likely to give confidence to households and consumers, economic analyst Sophie Jones says.

Monthly business analysis by ChristchurchNZ economic analyst Sophie Jones

ANALYSIS: October brought a glimmer of hope for Cantabrians grappling with rising living costs, thanks to two encouraging developments: the Reserve Bank's decision to cut the Official Cash Rate by 50 basis points, and a dip in inflation rates back to the 1%-3% target range for the first time since early 2021.

These changes are not just good news for businesses, they’re likely to boost confidence among households and consumers.

ANZ’s recent Business Outlook survey shows that business confidence is soaring, particularly in Canterbury, where optimism has reached its highest point since 2013. This is impressive, especially considering sluggish economic growth in recent months. But looking closer, it’s not surprising.

The number of businesses in Canterbury has continued to grow even in tough economic times. In fact, businesses in Canterbury accounted for a striking 23% of the national increase in new business locations over the past year, despite the region housing only 13% of New Zealand’s total businesses.

Among the new arrivals in Canterbury is Blackmaps Geospatial, which has become a key player in the aviation sector since setting up shop here last year.

There’s also accommodation venture Drifter Christchurch, which opened its doors in June as part of a broader expansion across Australasia.

These examples show Canterbury can attract and sustain businesses, even in challenging economic climates.

On the household front, Westpac's Consumer Confidence survey for September shows many households feeling more hopeful about future economic conditions.

Many households are starting to feel more hopeful about the economy in the future, but many are still feeling the effects of the recent cost of living crisis.

While the sentiment score is still shy of net optimism, it has climbed closer to that goal, reaching just over 93 in Canterbury – an encouraging shift from the 70s and 80s where it has languished for the past couple of years.

However, it’s important to remember that many households are still feeling the pinch.

According to Stats NZ, 36% of Cantabrians reported that their income barely meets everyday expenses, a notable increase from 29% in 2021.

The situation is even tougher in other regions, with 39% nationally and 44% in Auckland echoing these concerns. The silver lining is that households are starting to anticipate a brighter future, which is helping to lift overall consumer sentiment.

When it comes to job security, the outlook is mixed.

Westpac’s Employment Confidence survey indicates that national sentiment is at its lowest since the 2020 lockdowns, particularly in Wellington.

However, the downturn isn’t limited to the capital, with employment confidence in Auckland dropping to similar levels – in large part driven by job losses across industries like construction, manufacturing, and retail.

However, some regions are bucking this trend. Waikato, the Bay of Plenty, and Canterbury have all seen improvements in employment confidence, with residents expressing more optimism about job security and future earnings.

The resilience of these three regions might be linked to some common threads. Overall job numbers are still growing in each area, and it’s probably no coincidence they also happen to be some of New Zealand’s most diverse regional economies.

All three also rank near the top of the charts for population growth in recent years. The greater resilience that comes with a more diverse regional economy, coupled with a general sense of growth and momentum in these areas, might be providing more of a buffer for confidence in these regions than others.

Overall, recent trends in Canterbury and beyond show confidence has returned. As businesses continue to thrive and households gain a more hopeful outlook on the future, there are definite signs of an improved economic landscape.