Confidence levels have fallen below those measured during the GFC
Small business confidence has plummeted in the June quarter, though ANZ says early indicators for July “offer hope.”
ANZ’s NZ Business Micro Scope survey found that regulatory requirements were still the biggest issue faced by many small firms, but low turnover has gotten much more attention in the post-COVID business environment. It says COVID-19 has “wreaked havoc” on small business confidence, with a net 48% of small businesses feeling pessimistic about conditions for the year ahead.
ANZ’s composite growth measure for small firms - a proxy for GDP growth - fell to its lowest level, sinking beyond what was seen during the Global Financial Crisis.
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“The COVID-19 induced halt in activity pushed the composite measure to -24; the lowest point since we started measuring this data in 1999,” the report noted.
“The composite measure is based on growth indicators such as firms’ own activity outlook, hiring and investment intentions, and profit expectations. All four growth indicators plummeted this quarter, relative to last.”
Despite this, ANZ says monthly readings from April to July suggest that confidence is slowly coming back, though all indicators are still “contradictory.”
Firm’s expectations of their own activity fell to a net 38%, with retail firms being the least optimistic due to hard competition and the hit to the tourism sector. Hiring intentions fell with a net 36% of firms expecting to cut jobs over the coming year, though the report noted that the government’s support measures have eased the blow to some degree.
“Some of the supportive policy measures have cushioned the blow, principally the wage subsidy and its extension,” the report said.
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“But these policies are set to roll off in September and the inevitability of extremely difficult businesses conditions, including the economic hole that international tourism once occupied, will become apparent in time. However, the early read for July shows a sharp rebound has begun.”
Profit expectations plummeted in June, with a net negative 58% expecting profits to fall.
“It’s sombre reading when the least pessimistic sector comes in at -43% (construction),” the report noted.
“Compliance, competition, difficulty passing on higher costs and difficult domestic conditions are also weighing. And while the July monthly data bounced back strongly, there’s still a long way to go.”
