Confidence better but still gloomy

By Phil Boeyen, ShareChat Business News Editor

Thursday 24th January 2002

Business confidence in New Zealand is improving although pessimists still outnumber optimists according to new data.

The latest NZIER survey on business confidence shows a net 10% of firms expect general business conditions to deteriorate over the next six months, up from 44% in the previous survey.

The survey shows confidence rose in all sectors during the December quarter, with the largest improvement in the manufacturing sector.

While all sectors remain pessimistic about general business conditions over the next six months, the retail and wholesale sector is the least pessimistic, while the service sector remains the most pessimistic.

The NZIER says the pattern of the last few quarters has continued, with firms lacking confidence despite reporting increases in their own output and sales in the December quarter.

"Given the increase in activity, it appears firms' lack of confidence is stemming from their fear of the impact of the slowing world economy on general business conditions.

"There are signs of the impact already with firms reporting an easing in export growth. Cost increases remain widespread across all sectors, also dampening confidence. Price increases have limited the deterioration in profitability this quarter."

The institute says firms appear to be in a holding pattern and are cautious about expanding capacity, with little intention to invest in either new buildings or plant and machinery over the next three months.

Businesses also report that they are continuing to experience difficulty finding skilled labour, although the difficulty has eased from recent quarters. Skilled employees remain the most difficult to find in the manufacturing and building sectors, while service sector firms had the least difficulty finding skilled workers.

"Part of the reason why firms are now finding staff less difficult to obtain is a recent turn around in net migration. From the middle of last year, following three years of net migration outflows, arrivals of migrants began to outnumber departures."

The Reserve Bank announced on Wednesday it was leaving interest rates at their current level of 4.75%, citing a stronger domestic economy.

However the NZIER says that weaker employment and wage growth could lead to cuts in household spending, hindering economic growth in the short term.

Comments from our readers

No comments yet