Revising spending and prices
Tony Alexander (pictured above), independent economist, provided a monthly glimpse into New Zealand’s business sector through his publication, Tony's View.
This month, insights from 383 respondents across various sectors highlighted ongoing economic challenges.
“The aim is to gain real-time insights into what is happening in various sectors with respondents choosing whether to focus on customer flows, pricing and cost pressures, expansion plans, and so on – whatever they consider to be the most important developments,” Alexander said.
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Concerns over customer demand
Businesses expressed significant concerns about customer demand and cash flow.
“Concerns about customer demand and cash flows are high and some areas of desired spending are having to take a back seat,” Alexander said.
These include climate change mitigation and spending on workplace culture, reflecting shifting priorities amid financial strain.
Adjustments in pricing strategy
Despite economic uncertainties, fewer businesses plan to raise their selling prices, which could signal a slow battle against inflation.
“Fewer businesses plan raising their selling prices but as yet a killer blow against inflation necessary for the Reserve Bank to cut interest rates is not at hand,” Alexander said.
Labour market and employment trends
The labour market continued to show signs of easing, aligning with a broader trend of adjustments across business operations. A net 18% of businesses report it is getting easier to secure good staff, maintaining the status from last month.
Strategic spending in focus
The survey also shed light on where businesses are directing their scarce resources.
The top three areas for increased spending are strategy development, retention of existing customers, and social media presence.
Conversely, cutbacks are planned in inventories and plant & equipment.
“This month’s slight rise may just be a blip,” Alexander said. “Spending on resilience is having to take a back seat at the moment.”
Outlook on business health and morale
Looking ahead, businesses anticipate challenges not just in financial performance but also in maintaining staff morale and mental health. The ongoing economic pressures are expected to have a profound impact on business revenue and the psychological state of employees.
“But now times are bad and the need for extra focus is rising,” Alexander said. “Yet affected by cash flow concerns businesses as noted above are pulling back on plans for spending in this area.”
Economic outlook and policy implications
As businesses navigate through these turbulent times, the broader economic outlook remains cautious.
“If it isn’t then that will become a problem for monetary policy as the Reserve Bank needs depressed businesses in order to get altered pricing behaviour,” Alexander said.
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