Gloom eases despite rising cost pressure
Confidence among New Zealand’s businesses has improved slightly, although the number predicting a fall in profits is climbing.
The latest quarterly survey of business opinion (QSBO) found a net 4 per cent of businesses expect to see a pick-up in their own activity over the coming year.
In the September survey, as many businesses were expecting a fall in activity as were expecting an increase, the weakest confidence since 2012.
The outlook for the economy also improved, but remains weak. A net 18 per cent of businesses expect the New Zealand economy to deteriorate in the coming year, an improvement on the net 28 per cent that predicted a deterioration back in September.
‘‘The results can be summarised as ‘less gloomy’ rather than ‘more happy’,’’ Christina Leung, chief economist at the New Zealand Institute of Economic Research, said.
Since business confidence hit a six-year low in September, the mood has lifted across more than one survey.
The latest QSBO found manufacturers reporting a rebound in both domestic and exports, while retail sales picked up. Architects reported a strong pipeline of government-related work.
Finance Minister Grant Robertson welcomed the lift.
‘‘Clearly since the Government was elected there have been some challenges in terms of business sentiment,’’ Robertson said.
‘‘But this shows businesses overall are improving in their confidence – in particular they’re more confident about their own activity and their own activity going forward.
‘‘The real data on the economy is good. We are seeing solid economic growth in New Zealand – we’ve got low levels of unemployment, we’ve seen some excellent numbers around building consents in recent days. We’re feeling positive about the real data on the economy, and it’s good that these sentiment surveys are perhaps reflecting a bit more of that.’’
While confidence improved at least slightly across many indicators, the number of businesses warning of higher costs and expecting lower profits hit new multi-year highs in the December-quarter QSBO.
A net 15 per cent expect profits to fall in the next three months, the highest proportion since 2011.
A net 47 per cent said costs had increased in the past three months, the highest share of businesses in any survey since 2008.
The number of businesses expecting costs to increase in the coming quarter was down marginally from the September quarter, but remains high.
Leung warned that the increase in costs could lead to a fall in investment and hiring plans in the coming year.
The low level of business growth led Leung to warn that economic growth could slow, with the results consistent with an economy growing at a rate of about 2 per cent to 2.5 per cent.
National Party finance spokeswoman Amy Adams said the survey showed firms were gloomy, and suggested the economy would grow more slowly than the Treasury was forecasting.
‘‘The Government has passed union-friendly employment law changes, significantly hiked the minimum wage, will soon push forward with a capital gains tax, and made reckless decisions such as banning oil and gas and banning foreign investment,’’ Adams said.
‘‘These changes have real effects on businesses, their ability to invest, hire new staff and pay higher wages that are driven by productivity gains.’’
‘‘The real data on the economy is good. We are seeing solid economic growth in New Zealand.’’ Finance Minister Grant Robertson