Rapid and widespread inflation, caused by supply-chain issues during the pandemic and higher demand for goods and services as interest rates fell, has clobbered the global economy over the last three years.

The recent release of December 2022 quarter GDP data means we finally have three full years of economic data on the COVID-19 pandemic. With the last two quarters of 2022 being without COVID-19 restrictions, we’re also starting to get a clearer read on how the economy is performing without pandemic restrictions. But intense and persistent inflation, and rapidly rising interest rates, have added a new complication to the mix.

Chief Forecaster Gareth Kiernan has penned Infometrics’ traditional Christmas Carol. Sung to the tune of Brenda Lee’s Christmas song “Rockin' Around the Christmas Tree”.

Recent Infometrics data provides the first comprehensive analysis of the impact of COVID-19 on different industries and local areas across New Zealand. Our regional and sector data, which sits behind our Regional Economic Profiles and Sector Profiles, was updated in early February 2022 with estimates for the year ending March 2021. Our analysis shows a considerable shock to parts of the New Zealand economy, and the weakest period of employment activity since the Global Financial Crisis (GFC).

Economic activity staged a comeback in the December 2021 quarter as Delta restrictions were gradually eased at different times across the country, with mixed results seen across regional economies. Infometrics’ December 2021 Quarterly Economic Monitor shows economic activity rose 2.8%pa in the quarter on provisional estimates, with delayed demand after the Delta restrictions being unleashed, and a reasonable summer being enjoyed across many local economies.

The emergence of Omicron promises that 2022 will be another year of disruption for the New Zealand economy. The latest forecasts published by Infometrics show the Red “traffic light” setting knocking 1-2 percentage points off GDP during the first half of this year. Alongside government restrictions on the hospitality and events sector, spiking case numbers are likely to increase households’ Hesitancy Of Going Out (HOGO) and result in softer economic outcomes, as suggested by recent falls in consumer confidence.

With Omicron set to spread across New Zealand over the coming weeks, many businesses are faced with making tough decisions about how to best protect their workforce and ongoing operations. We estimate that absenteeism could rise to 12% of the workforce, if key government forecasts bear out, which would hamper activity.

Omicron has broken out into the community, and New Zealand finds itself at red in the COVID-19 Protection Framework, with concerns of up to 25,000 cases a day. The Omicron outbreak continues the incredible levels of uncertainty that have been a hallmark of life over the last two years. Our latest set of forecasts for the economy will be published on 4 February, and they are set to reflect both this uncertainty but also the stronger position the New Zealand economy has worked hard to achieve. From the Beach provides an overview of some of the key factors (apart from COVID-19 itself) that we think will define economic outcomes during 2022.

New analysis from leading economic consultancy Infometrics finds that the Omicron outbreak in COVID-19 will disrupt New Zealand’s economic recovery. Exploring Omicron’s potential economic impact on New Zealand identifies a range of key challenges New Zealand is expected to face during the Omicron outbreak, including limits on events and hospitality activity, high levels of workers off work, and difficulties finding some goods.

One of the starkest contrasts of pre- and post-pandemic life is how much less connected we are with overseas countries. International travel was obliterated almost everywhere in about a month when COVID-19 began its spread across the globe. Airline companies slashed their capacity in response, sending surplus planes to the desert where they won’t depreciate as quickly. The domestic tourism boom has helped local airline traffic to recover, although our ongoing isolation continues to negatively affect the tourism sector. Overseas evidence shows that as travel restrictions have eased, people are keen to get back out and explore, but activity has not returned to pre-pandemic levels yet.