Business confidence hits new low

The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed a further decline in business confidence in the June quarter, as higher interest rates dampen demand across the New Zealand economy.

A net 35% of firms expect a deterioration in the general economic outlook over the coming months.

“Overall, these results suggest the potential for a continued slowing in the New Zealand economy over the coming year,” said Christina Leung (pictured above), deputy chief executive and head of membership services at NZIER.

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Sector-wide pessimism

The weakening in confidence was pervasive across the sectors surveyed.

The building sector remained the most downbeat, with a net 65% of firms expecting a worsening in the general economic outlook.

The manufacturing sector was also very downbeat, with a net 63% of manufacturers expecting deterioration.

“The increased pessimism in the retail sector continues to be driven by the weak demand given the headwinds facing the household sector,” Leung said.

Cautious approach to hiring and investment

Higher interest rates and heightened uncertainty have made businesses much more cautious about hiring and investment.

A net 35% of firms plan to reduce investment in buildings, and a net 27% plan to reduce investment in plant and machinery over the coming year.

“Many firms are holding off on investment until they feel more certain about when demand will recover,” Leung said.

Labour market trends

A quarter of firms reported reduced staff numbers in the June quarter due to weak demand.

The softer labour demand and increased labour supply since the reopening of international borders have eased labour shortages. It is now easier for firms to find both skilled and unskilled labour.

Easing pricing pressures

Weak demand has driven significant easing in pricing pressures, particularly in the building and manufacturing sectors. The decline in cost and pricing indicators suggests a further easing in inflation in the New Zealand economy.

“We continue to forecast annual CPI inflation to ease back towards the Reserve Bank’s 1% to 3% inflation target band in the second half of this year,” Leung said.

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