Days to the General Election: 38
See Party Policies here. Party Lists here.

Latest NZIER Quarterly Survey of Business Opinion shows businesses still very downbeat, with 25% of them expecting weaker demand in the next quarter; construction sector most pessimistic

Latest NZIER Quarterly Survey of Business Opinion shows businesses still very downbeat, with 25% of them expecting weaker demand in the next quarter; construction sector most pessimistic

The latest NZIER Quarterly Survey of Business Opinion (QSBO) paints a very downbeat picture, with some 28% of businesses saying they expect to cut staff over the next quarter and 25% expecting weaker trading conditions. And the construction sector is the most pessimistic.

Principal economist Christina Leung said the net 37% of businesses that reported a decline in own trading activity during the June quarter just finished brings this measure to the lowest level since March 2009.

"This is not surprising, given the tight trading restrictions under Alert Level 4," she said.

"However, a net 25% of businesses also expect weaker demand in the next quarter. And although there was a slight improvement in headline business confidence, businesses remain pessimistic about general economic conditions over the coming months. Business confidence tends to soften heading into a general election, with businesses holding off on major spending decisions given uncertainty over the outcome. This quarter, the pre-election uncertainty is compounded by uncertainty over how the Covid-19 outbreak will play out."

And she said firms have become "even more cautious" and have pared back on headcount and business investment.

"A net 19% of businesses reduced staff numbers in the June quarter, and a net 28% expect to in the next quarter – the lowest level since March 2009. The New Zealand labour market has undergone some major changes, with firms reporting it is now easy to find staff – a sharp turnaround from the acute labour shortages reported in recent years. Fewer businesses also saw labour as the main constraint on growth."

ANZ senior economist Liz Kendall in commenting on the QSBO results said the impact of the Covid the crisis had become much more evident in realised (and expected) activity, hiring and investment.

"Some of these impacts will be dampened by lockdown effects and may improve in coming months. But forward-looking elements of today’s data and the pulse of the business psyche are consistent with our view that the outlook is grim; experiences and intentions will shape actions. Today’s data will be worrying for the RBNZ and Government; firms are reportedly hunkering down, shedding workers, and cutting prices. But more monetary stimulus is needed, and an aggressive, front-loaded approach is warranted." 

NZIER's Leung said businesses are also planning to reduce investment, with a net 36% planning to reduce investment in both buildings and plant and machinery over the coming year.

Caution among businesses about investing in buildings is having a negative impact on the construction sector, she said.

"The construction sector is now the most pessimistic of the sectors surveyed in the QSBO, with a net 75% of building sector firms expecting a deterioration in economic conditions over the coming months. Even prior to the Covid-19 outbreak, commercial construction was facing headwinds with banks tightening up access to finance in preparation for increased capital requirements."

The subdued outlook for construction is reflected in architects’ measure of activity in their own office, with a particularly large decline in the commercial construction pipeline expected over the coming year.

Manufacturing sector firms also feel pessimistic, as weak demand puts downward pressure on prices and drives a further deterioration in profitability. Manufacturers reported a weakening in both domestic and export demand.

The retail sector was the exception to the overall trend of a moderation in cost pressures and firms cutting prices in the face of weaker demand. Retailers reported cost increases, likely reflecting the impact of social distancing and other operational requirements. However, retailers have been able to pass on increased costs by raising prices, despite weaker demand.

The services sector turned from one of the most pessimistic to the least pessimistic of the sectors surveyed. That said, a net 61% of services sector firms still expect a deterioration in economic conditions in the coming months. This was despite the expectation that interest rates would fall further over the coming year.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

47 Comments

This is probably because I know many people working for small businesses.
Only one company I know has no plan of cutting staff number.

28
up

I was just reading the OneRoof and they said everything is peachy. House prices to soar.

15
up

Meanwhile the NZX50 is cruising to an all time high. The gap between reality and the markets widen.

13
up

Is that probably because a large percentage of OneRoof's revenue is from real estate sales advertisement?

17
up

I would never question the integrity of their experts.

OneRoof have as much credibility as real estate agents: zilch.

24
up

It's a very good time to buy!
...
Oh... you're a vendor? Sorry, what I meant is this is a very good time to sell!

Gonna need a host of rentals when 28% + laid orf. But can the Social Welfare department afford em.??.

Taxpayer subsidies, subsiding. No Interest, no Taxes.

Keep throwing money on the table...so our ex-bread winners can eat.....and our poor Rental Owners can exist....to the moon and back.

You know that's 28% of businesses, not 28% of the population right? We're no worse right now than in 2009 according to their figures.

Compounding effect is the effect one has to watch out for. This will affect all activity as money is borrowed into production, but that will cease as the 'Total" effect is compounded by stupidity, reducing the deposits of "Savers" but expanding the delights of "so called" rental investments.

It is what most Government Officials crave, a never ending rise in debt, plus a never failing increase in their own expectations.

The poor people who work, but are going to be laid off, may never work again. But they may change their stance on Voting.

Labour is not working, but it is compounding our debt and may do for ever more. Leverage is a giddy height to reach in this fair land.

It is not Rocket Science that keeps Tesla Investors happy amid those Shanghaied up 4% today. It is further expectations of further Giddy Heights to come in the future, due to further QE.

Cashing in on it for ever and a Day......printing ones and zeros ....is one thing, but someone has to keep the balls in the air....and pumping and dumping their portfolios......and it is certainly not the "Unemployed, nor the Great unwashed" soon some will have all the Funny money in the World, but some may not be laughing. Customers are the customary way to fill the voids.....and that is why they want you to spend, spend, spend. And get the balls rolling around and around for ever and a Day. Flights of Fancy do not work, unless paid for. Ask Air New Zealand...etc.
Saving the Economy......not a chance, unless Change is mooted....and it ain't Gold, Frankincense and Mer. Tesla, nor econ-o-mic Theory.

Nor pumped up Polly-ticians and Bwankers. And those who profit by the World's stupidity.

Would never employ one of them.....greedy beggars..

If construction is going to suffer the worst activity then why don't their employers /employees transfer to the housing sector which is booming in my area of Papamoa. I am sure there are other areas in NZ where there is activity, perhaps to a lesser scale but it has positive outcomes.
Wouldn't it be sensible to retrain construction workers into tradies to work in the housing industry.

There is so much work to be done re construction in this country, however moving resource sideways between residential/commercial/Infrastructure is often quite difficult. NZ inc. has under trained in the off site and on site areas of construction for 20+ years.

Well, FA, it looks like there has never been a better time for Staff from Construction to "Cross the Bridge" to Residential/ Commercial and Infastucture.
The government will obviously have to finance the switch which will be positive as it looks like Construction will never come back to where it was Pre-Covid.
Sorry, Bob Jones, your days of earning power looks as if it has come to an abrupt end.

I have a feeling buyers will wake up in September and realize the dream is over and anyone who has just purchased will be trapped in the nightmare called negative equity and rising unemployment and no more free money.,
But for now we still live in fairyland and wishes are coming true for sellers.

Becnz - ' I have a feeling buyers will wake up in September and realize the dream is over ' In my opinion the only dream that will be over is this was the best time to buy, with uncertainty from Covid-19 and looming election. You may not be able to buy but there are plenty who can and will. QE money needs a home and that home is shares/property.

Shares yes but property, how?

Well it is usually a lag.

QE ends up in the hands of Bond holders who, which include pension funds and other fund managers, as they bonds lose their yield they reinvest that money into the stock market and that causes a boom in equities, and as that happen people leave their pension funds or take profits from their fund manager and then put that money into residential property among other things like Art and vintage cars.

Also QE keeps bank funding costs low so that interest rates dont rise on the open market (even if OCR is rock bottom) meaning they remain affordable.

However when unemployment is high, you probably wont see a boom in property prices as it doesnt matter how low interest rates are if there is no jobs to pay for it.

I will look to purchase again but sold last house last year but at moment shares are out performing property so why rush to property when you can make 30 plus percent in 3 months in mainstream shares versus property which could become a trap if market comes of the boil.
Longterm property is still good but prefer to wait and see for 3 months and stay more liquid investments.

thats a lot of people to plant waterways then, the only initiative from the Government so far to create any jobs. Maybe they can rip up the Viaduct and plant some trees and flax.

Regardless of employment, I find this statement worthy of discussion:

'Leung said businesses are also planning to reduce investment, with a net 36% planning to reduce investment in both buildings and plant and machinery over the coming year.'

Reduction in plant and machinery investment is a concern. Technology investment drives productivity gains which we desperately need. If labour supply is no longer a constraint maybe some businesses see less need for productivity improving investments. My concern with Govt funding “jobs for nature” (btw I love nature), free lunches, tourism investment etc is they are driving us further down the road towards relatively lower productivity and thus making us all poorer. We can’t run a 1st world health care system etc on tree planters, lunch makers and tour guide incomes.

The Hotel and Motel industries are sorted. Managed Isolation. Quarantine, Homeless
Waipuna Lodge has today been booked out to end of December 2020

16
up

It's the trend of consecutive government for the past 20 years. Screw productivity, import cheap labour.

It's a short term fix causing systemic issues. Its like a person eating junk food in higher and higher doses, just because it tastes nice. Eventually you end up with a massive body that can't move around fast, is slow witted and cannot adapt. That's our economy and people of all stripes want to go back to that!

Never let a good disaster go to waste. This should be a huge oppourtunity for productivity gains. Government should greatly expand, if not fund R&D, their retraining initiative is good (but should be for highly skilled trades NOT tree planters) and change the tax system to favour productivity over speculation on assets. But they won't because (insert ideology, either left or right), they are populist and have no real plan other than to react and stay in power. Bold leadership is lacking, to engender a vision and encourage people to get on board. Instead we get an acceleration of the horrific status quo, no matter which major party you vote for.

Best the government can come up with is plant trees and clean up rivers not looking good for the future.

It's hardly a surprising survey result. Not only Covid and an inept Govt at the wheel but also the threat of 1970s style union laws and wealth taxes coming if Labour/Greens win the election.

I'm expecting 12% unemployment by this time next year.

The National Party leader gave a speech in his Bay of Plenty hometown of Te Puna.

An upside-down Tino Rangatiratanga flag hung behind Muller as he spoke - and during his speech he had to correct himself after saying he'd joined the Labour Party.

https://www.newstalkzb.co.nz/on-air/heather-du-plessis-allan-drive/audio...

This is a bit silly.

The "threat" of more money being available to people who work for a living and to recirculate through the economy, instead of recent years' focus on redistributing wealth to asset holders. Oh, the dire threat of a time when people in everyday jobs could afford to build a family and a life. What a horrid thought indeed!

If you are an optimistic then you could say 72% of companies don't plan to cut staff...

The cuts will spread just like the virus has aorund the world by the end most areas will face a haircut except local government depts.

That was my read of it - Majority of firms plan to hold on to staff. If that is the case we might just be ok. Hell some might even hire new staff,

If that's the case then the government hasn't completely destroyed the economy due to the lockdown?

A friend of mine who runs a travel agency and was supporting 8 employees (cushion from wage subsidy-helping) planing to free all employees and try to go into hibernation or may shut.

Will be depression to all of them, if and when it happens.

Probably a good time to step out. Travel agents will disappear from high street just like video rental.

10
up

If you're waiting for the pollies to do anything you'll be waiting a while. They can talk, they can give away money, mostly our grand children's money & they have a huge array of committees that ironically refuse to commit to anything. A third our this nations GDP goes into this so-called governance & most of that is wasted. It is a very sad scene.

Amen! We should be cutting government and reducing tax across the board. Running our hard earned money through the wasteful and inept government machine is a pointless endeavour.

Let individuals decide what to spend money on. The government can focus on the absolute basics.

Haven't we spent the last 40 years listening to this facile message, and watching society deal with the results of following it? Do you want a health system like the one in the USA?

Not really. I think they would be better off with a more private system. Currently us.gov spends massively on health (thanks Obama! ;) ). Having said that, if I had a very serious illness like cancer I'd much prefer to be in the US than in New Zealand. The survival rates there are much better than in our public system.

Private health care is priced, public health care is rationed.

Priced - out of the reach of a large proportion of citizens. The "big government bad" message is getting a bit stale, especially now.

Cue the same old neoliberal mantras that the boomers toast at the rotary club! When in reality the first in the queue for government money when the excrement hits the rotary is the free market cheerleaders!

If you're waiting for the pollies to do anything you'll be waiting a while. They can talk, they can give away money, mostly our grand children's money & they have a huge array of committees that ironically refuse to commit to anything. A third our this nations GDP goes into this so-called governance & most of that is wasted. It is a very sad situation.

Economy consequence of cironavirus will only be felt after government subsides end particularly wage subsidy.

A false sense of Euphoria exist by government printing and distribution of money and some unaware are getting carried away and the result reflects in stock and housing market (If before lockdown had a feeling that was in bubble so can understand the extreme that is existing now, whic has been created by liquidity / government).

Both stock and housing market are at a greater risk now than before.

Have doubts if any economy could escape the inevitable - some country may be worse than others but will be bad for all.

It really depends on whether the real economy survives this period of "life support" from the government. There's a possibility that much of the economy will survive (RIP Tourism, International "Education" etc.). What's left of the tourism industry will need to adapt to the new normal - Kiwi tourists. Weaker businesses will fail, but this isn't always a bad thing.

Those that adopt the efficiencies forced upon them by COVID19 may even prosper - remote working, online sales and lean organisation structures.

The 90% economy might not be so bad. It will be lean, efficient, diverse and significantly less fragile. We may even be greener and less globalised - both good things in my eyes.

It would be good to see international education refocused on actual education, not visa mills.

Npc - Good summary of our economy. In my opinion NZ will bounce out of this downturn in a very good position and am amazing how gloomy so many are on this site.

That's if the government let's them fail, i.e. understands this is a natural part of the cycle. The way MMT sounds like it's going is that the government can print as much as they want without adverse effects, and they are in the middle of testing that theory out. If it's true, then nobody needs to fail as currency can be printed to bail out anyone and everyone. Zombie company? No problem, bail out. Profitable company? Pay taxes, sucker. Hang on, why do we suddenly have all these companies with their hands out claiming poverty...

Productivity improvements by "getting rid of the chaff" only happens if the government allows it to happen. If they throw money printing distortions into the mix, they aren't interested in productivity, only in a never ending gravy train which likely results in government ownership and then mis-allocation of resources.

Shouldn't we be accepting that international tourism will not happen for at least 2-3 years?
We used to make , and grow clever stuff for the world.
The we found that the easiest was to be bed changers, and cheap protein providers.
Surely now, with a head start on the world, is the time to find new directions.
As a very small manufacturer of a product only available to the trade in this country, I have spent 18 years trying to get the knowledge that I don't have from Government sources.
Without that, my trials overseas have lead to failures.
We small makers HAVE to have Government backing to succeed. England, China, U.S.of A. all begun global success with their respective leaders behind them.
Why do we find that so onerous?

Your access to our unique content is free - always has been. But ad revenues are under pressure so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.

Days to the General Election: 38
See Party Policies here. Party Lists here.