Survey finds slump in business outlook
Business confidence continues to fall, with the first signs that pessimism causing businesses to cut back investment plans.
The quarterly survey of business opinion (QSBO), New Zealand’s leading survey of its type, found a net 19 per cent of businesses expect the economy to deteriorate in the coming year.
Three months ago the survey found a net 10 per cent were pessimistic.
The scores in the survey subtract the number of respondents which are negative from those which are positive, meaning pessimists currently strongly outnumber optimists.
Christina Leung, a principal economist at the Institute of Economic Research (NZIER), said this was the weakest outlook since March 2011.
Companies were more optimistic about their own activity in the recent months and for the coming year – a better guide to how the economy will fare than general sentiment.
But here too, the mood is becoming more downbeat. A net 7 per cent of business reported demand increased in the June quarter, down from 15 per cent in the March survey.
The June measure of experienced activity was the weakest in five years. A net 16 per cent of businesses said profits declined in the past three months, while a net 12 per cent expect profits to decline in the next three months.
Leung said the profitability measure ‘‘is starting to impact on future plans for businesses,’’ with investment intentions also weakening. The survey suggested ‘‘downside risks’’ to economic growth expectations.
NZIER said a net 4 per cent of firms expected to decrease investment in new buildings. A net 2 per cent said they would increase investment in plant and machinery in the coming year, but this was a sharp decline on March.
ASB noted that employment intentions – a guide to how many companies expect to take on new staff – remained positive, with companies taking on more staff in recent months.
‘‘This creates some uncertainty around how business will respond to perceptions of weak economic activity, and in turn how much business decisions themselves drive an economic slowdown,’’ ASB senior economist Jane Turner said.
‘‘As we have been saying for some time, New Zealand economic fundamentals remain supportive of abovetrend growth.’’
ANZ senior economist Liz Kendall said the survey showed signs that weak confidence was starting to feed into businesses’ actual decision-making.
‘‘How businesses respond to the challenges they are reporting will have important implications for the economic outlook from here. It is fair to say that downside risks have increased.’’
The retail sector is now in its most pessimistic state since 2009, when the national economy was in recession.
All regions were broadly downbeat, excluding the West Coast. Taranaki and Marlborough were especially pessimistic.