Business confidence remains weak in quarter, survey shows

WEAK business confidence remains a theme throughout New Zealand and it has become a focal point for economists.

The Otago Chamber of Commerce quarterly business confidence survey carried on the theme yesterday.

Expectations the New Zealand business sector would improve fell again in the three months ended June. Only 17.54% of respondents expected the situation would improve compared with 21.21% in March.

Expectations the situation would deteriorate in the next six months had risen to 36.84% from 28.6% in March. About 14% believed their personal situation would deteriorate, compared with 16.1% in March.

Otago Chamber of Commerce chief executive Dougal McGowan said he had been relatively optimistic about the fortunes of southern businesses for a long time but now even he was feeling gloomy.

‘‘I warned nine months ago some businesses, like retailers, were starting to struggle with less spending and investment.

‘‘The effects of the rising minimum wage, an uncertainty about employment law and rising costs are combining to make life difficult for businesses.’’

Many businesses south of the Waitaki were finding it quiet and some had deferred investment decisions, he said in an interview.

The effect of United States President Donald Trump’s tweets could have an immediate impact on things such as the dollar.

Trade tariffs proposed by Mr Trump could also

McGowan said.

The region still relied mainly on primary industry for its wealth and increased US beef production on top of increased tariffs could hurt the local economy.

Fortunately, the region was not solely reliant on the primary sector. The education, service and IT/innovation sectors were growing in the region, helping insulate Otago and Southland from a global downturn, he said.

‘‘New Zealand is still in pretty good shape, particularly in the South. However, a downturn can

hurt, Mr happen very quickly.’’

Last week, the New Zealand Institute of Economic Research’s quarterly survey of business opinion fell in line with the monthly ANZ survey, confirming a slowdown in underlying economic growth.

Business intentions were mixed. Investment intentions had plunged and employment intentions had held firm.

ASB chief economist Nick Tuffley said there was evidence of ongoing growth in labour demand.

Growing wages were a key assumption underpinning the ASB’s view of stronger household spending in its economic forecasts.

Despite a pessimistic general outlook of the economy, details buried within the quarterly survey showed there was continued support for some sectors, par ticularly exportrelated activity and services, he said.

‘‘We expect the Reserve Bank will take note of the fall in business confidence and, like us, will consider revising down its secondhalf 2018 economic growth outlook.

‘‘Beyond that, the Reserve Bank will take a cautious approach, placing more emphasis on how measures of economic activity evolve from here.’’

There would be a focus on retail demand, employment and investment, Mr Tuffley said.

Weak business confidence and the risk it presented to GDP growth for the rest of the year suggested the odds of an official cash rate cut — rather than a hike — were growing.

Other major findings of the Otago Chamber of Commerce survey included businesses still finding it hard to get skilled or specialist staff.

Businesses were still concerned about rising costs. Nearly 60% of respondents believed their average costs would go up again in the next three months and a third believed they would stay the same.

Staff costs had continued to be the highest area of concern for most respondents over the past six months. Nearly 61% believed staff costs would have the biggest effect on profitability in the next six months compared with 55.4% in March.

Fuel costs had also been a factor and 16.1% said fuel costs had had the biggest effect on profitability in the past six months.

Businesses believed interest rate charges on loans would mostly stay the same for the next year.

❛ The effects of the rising minimum wage, an uncertainty about employment law and rising costs are combining to make life difficult for businesses Dougal McGowan