The last couple of months have seen an unusual situation in this economy.
We have been fortunate to be largely untouched by lockdowns, but we have felt the effect of other regions who have been.
We see this effect mostly in the retail and accommodation sectors, where our visitors from Auckland and Hamilton have been abruptly cut off, causing some concern for local businesses.
Retail is a prominent part of our economy because we see it a lot, but it’s more of a medium-sized sector – around six per cent of our economy in value but around nine per cent in terms of employment.
Businesses tend to be on the small side, and therefore more vulnerable to changing economic conditions.
While we know that some businesses have experienced a drop in demand recently, the good news is that the retail sector was travelling quite well before now. Comparisons to last year aren’t that useful given then events in 2020, but if we look back to 2019 retail spend is 10 per cent up on that year.
Some of that increase you would expect; population has grown over the last two years, so retail spend will of course follow, but that’s only about half the difference. While we have lost some tourist spend, we have also gained a lot of local spend with people not going overseas.
Retail areas or precincts show varying fortunes; the CBD continues its rough run, not helped by fewer office staff in the city, while the Mount is on par with previous years and vulnerable to fewer tourists.
Other centres are performing quite well though – Tauranga Crossing and Bayfair being the stand-outs.
Where people are spending money is interesting. Card spend statistics show that the fuel and food categories are up, with higher prices likely driving those increases. Clothing and department stores, however, are well down, perhaps reflecting a shift in spend habits.
The big change has been in home and recreational retailing, where spend is 15-20 per cent up on last year. People are clearly showing a preference to spend more on their homes than themselves.