Firms expect weak activity, more job cuts

This quarter, the pre-election uncertainty is compounded by uncertainty over how the Covid-19 outbreak will play out.

NZIER

New Zealand firms aren’t expecting a pickup in economic activity anytime soon and many plan to further reduce staff.

“Firms have become even more cautious and have pared back on headcount and business investment,” according to the latest quarterly survey of business activity from the New Zealand Institute of Economic Research.

A seasonally-adjusted net 37 per cent reported softer domestic activity in the June quarter versus a net 12 per cent who were downbeat in the prior survey.

Looking ahead, a seasonally adjusted net 25 per cent expect conditions to weaken over the next quarter versus a net 14 per cent in the prior survey.

“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,” NZIER said.

A net 19 per cent of businesses reduced staff numbers in the June quarter, and a net 28 per cent expect to in the next quarter — the lowest level since March 2009. The ease of finding labour, however, jumped to a net 19 per cent of firms saying it was easy to find skilled labour versus a net 44 per cent that had trouble in the prior survey.

Businesses are also planning to reduce investment, with a net 36 per cent planning to reduce investment in both buildings and plant and machinery over the coming year.

Headline business confidence, however, did improve slightly. A seasonally adjusted 59 per cent were downbeat about the general business situation versus 68 per cent in the prior survey.

“Although there was a slight improvement in headline business confidence, businesses remain pessimistic about general economic conditions over the coming months,” NZIER said.