Business confidence improved modestly in the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER).
However, there are still a lot of worries out there.
And a majority of businesses are expecting a softening of demand in the coming months.
The survey shows a net 59% of businesses expect a deterioration of business conditions, down from 63% earlier. The survey covered the June quarter.
The slight easing of worries in the business community was accompanied by a marked easing in capacity pressure. The survey found there was in particular a significant drop in capacity utilization among builders and manufacturers.
And a net 10% of firms reported difficulty in finding unskilled labour, compared with 37% in the previous quarter.
The retail sector was the most pessimistic, due to pressures on household budgets providing constraint on spending. The impact of higher interest rates is playing a part in this trend, as households keep their wallets shut to meet the higher mortgage bill which is either already here or due shortly.
The manufacturing sector was also downbeat, with a net 63% of companies expending weaker conditions, with cost pressures increasing and the ability to charge higher prices slipping. The services sector had a similar experience with a net 63% of firms expecting weaker conditions.
Demand is becoming the main source of pressure, not supply, according to the survey.
The survey found firms are still hiring staff. There was a net 5% increase in workforce headcount in the June quarter. Furthermore, these employers expect to add another 4% to their workforce in the current quarter.
But the investment story was very different. A net 27% of businesses are planning to reduce investment in buildings, and a net 26% are planning to invest less in plant and machinery.
Severe weather played a part in all these problems. Unsurprisingly, the Gisborne area fared worse, with 92% of firms feeling pessimistic. But this was an improvement on the previous quarter when 100% of companies felt gloomy about the future.
10 Comments
When the Titanic sunk the passengers noticed the rate of sinking was quite variable. This led many to believe the ship wouldn't sink so they did little to prepare for what was inevitable ... And more died than was necessary.
If you run a business, be a good boy scout. "Be prepared!"
Yay.. Improved.
But if all the debt in this country is either borrowed to buy houses or they are re-mortgaged to finance a business, then what hope do we have.
There will be no innovation as everyone wants to get ahead by buying houses. Most of the materials we use to build a house are imported. We are going down the drain and fiscal mismanagement in this country.
God save New Zealand.
We've pivoted an increasing amount of our capital and labour away from exports and towards household and government consumption in recent years.
The plan from parties on both sides of the spectrum is to double down on the current economic model with mass migration. The slight difference being that the centre-right wants more household consumption and the centre-left wants more government consumption.
I reckon we're leaving it up to the global markets to force austerity on us at some point in the not-so-distant future.
"firms are still hiring staff. There was a net 5% increase in workforce headcount in the June quarter. Furthermore, these employers expect to add another 4% to their workforce"
To an RBNZ looking for an increase in the Unemployment Rate to affect the CPI, and so stem any further OCR rises, that's not what they want to see. For those looking for work it's excellent news, and those looking for a pay rises, ditto.
Speaking of further OCR rises:
The government has boosted its pay equity offer for Health NZ nurses by $1.5 billion to a total commitment of $4 billion
Te Whatu Ora-employed registered nurses get an additional 4.5 percent boost to pay for salaries between $69,566 and $99,630 plus penal rates; and senior nurses getting a 6.5 percent bump, to between $105,704 and $153,060 plus penal rates.
Both would also receive an additional $15,000 lump sum for backpay
Much deserved pay increases but goes against the "OCR will start coming down soon" narrative to say the least.
https://tradingeconomics.com/new-zealand/capacity-utilization
Can anyone with the actual survey results confirm if this capacity utilization result is correct? Decrease from 94% to 82%, which would be the lowest level since the GFC at least. Seems like it could be an error?
The marked decline in capacity utilisation amongst builders and manufacturers and the proportion of firms reporting difficulty in finding labour, especially unskilled labour
The easing in capacity pressures is also reflected in the continued increase in the proportion of firms reporting sales as the primary constraint on their business
Link
A roundabout way of giving bad news: basically, in the last quarter, sales has been a bigger constraining for businesses than labour and capacity. Retailers, manufacturers and service businesses (who's left, farmers?) are all concerned about weak demand, cost pressures and poor pricing power.
Feedback from recent travels around the BOP / Waikato:-
Kiwifruit grower (no debt!) - going to make a loss of $7,000 per hectare not including picking costs. Fruit too full of water and not enough fiber. Fruit goes from unripe to rotten too quickly.
Dairy Farmer - grass has no nutrition due to moisture and usual supply reject kiwifruit not available as feed (Not fit) this year. Production heavily down / costs up.
Regional Business award ceremony - message from all winners! Buy local. We need you more than ever right now. People looking but not opening wallets.
Big centers are mixed but regions feeling the pain everywhere! Hard to see upside to anything right now!
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