Sharechat Logo

NZ firms get even gloomier as profit expectations dwindle, activity slows

Thursday 31st May 2018

Text too small?

New Zealand business confidence got even gloomier in May as firms, especially retailers, expect slower activity and more are now anticipating earnings to shrink in the coming year. 

A net 27 percent of 354 firms surveyed in the ANZ business outlook survey expect general business conditions to deteriorate in the coming 12 months, compared to a net 23 percent pessimists in April. Companies typically get more downbeat about the broader economy under a Labour administration, making expectations for their own activity a better indicator for gross domestic product, and firms are the most pessimistic they've been about their own business since November with a net 14 percent predicting increased activity, down from 18 percent in April. 

"The survey made for fairly uninspiring reading this month, with all aggregate activity indicators flat to falling," ANZ Bank New Zealand chief economist Sharon Zollner said in a note. "The economy still has good tailwinds in the form of fiscal stimulus and the record-high terms of trade, but may be tiring nonetheless."

New Zealand's headline economic indicators have supported the idea of robust growth in recent, supported by strong inbound net migration fuelling residential investment in new housing and bolstering consumer spending, and the Organisation for Economic Cooperative and Development still anticipates solid growth.

While firms have been optimistic enough to absorb that expanding workforce, it hasn't spilled over into wage growth as consumer prices remain flat and per capita economic growth has been dubbed anaemic by some commentators, with a lack of infrastructure spending failing to keep up with the larger population. 

Today's survey shows companies are more concerned about earnings, with a net 8.5 percent expecting profits to fall in the coming year, compared to a net 0.9 percent in April, and just 3.2 percent intend to increase investment, down from 7.2 percent. Hiring intentions also declined, with a net 6.9 percent planning to take on new staff, down from 8.9 percent in April. 

Agriculture was the gloomiest sector at a net 39 percent predicting a deteriorating national outlook, followed by manufacturing at 28 percent, whereas retail was the most downbeat about their own activity with a net 3.6 percent expecting increased activity, followed by agriculture at 3.8 percent. 

A net 26 percent of firms intend to raise prices, up from 22 percent in April, with a net 33 percent of the services sector driving that increase. Still, inflation expectations remained anchored at 2.13 percent, up from 2.11 percent. 


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar rises against Aussie, Chinese yuan
Geothermal production drives record Eastland earnings, payout
RBNZ to announce final decision on bank capital rules by November
Licensing key to medicinal cannabis firm Cannasouth's ambitions
PwC says NZ banks would effectively hold 27.1% equity if RBNZ proposals are adopted
Terra Vitae says poor harvest to hit sales, earnings
Weak services sector growth raises concerns about NZ economic slowdown
National sticks to bob-each-way on US-China relations in new policy paper
Kiwi Property lifts annual profit 15% as valuations rise
Kiwi Property lifts annual profit 15% as valuations rise

IRG See IRG research reports