Businesses cautiously optimistic ahead
Businesses remain concerned about cash flows as rising costs continue to bite, while low customer demand is limiting the ability to raise prices, according to the latest Mint Business Insights with Tony Alexander.
In this latest survey, 446 respondents shared real-time updates on the challenges and opportunities they face, highlighting a cautious but growing sense of optimism in the business community.
“Businesses have become more concerned about their cash flows perhaps due to cost rises still continuing but the ability to gain selling price rises being restrained by low customer demand,” Alexander (pictured above) said.
Despite this, there are encouraging signs that hesitancy around spending on new equipment is easing, which could support a longer-term recovery.
Businesses’ top concerns
When asked about their main concerns for the year ahead, businesses highlighted the general economic outlook, customer demand, and interest rates as their top three worries.
“The top three concerns are still the general outlook for the economy, customer demand, and interest rates – the same as last month,” said Alexander.
This suggests that while overall optimism is on the rise, underlying concerns about current conditions remain slow to change.
Less worry about interest rates and politics
Tracking changes since March, the survey found that concerns about the economy are slowly declining, and there has been a noticeable reduction in worries about interest rates following recent monetary policy easing.
Fewer businesses are concerned about political issues and finance availability, while concerns about labour availability remain low.
However, supply chain issues have seen a slight uptick, reflecting ongoing challenges in global shipping prioritisation for New Zealand.
Cash flow and debt worries persist
Concerns about cash flows are increasing, driven by weak sales, rising costs, and tax obligations, with bad debt concerns also edging up.
“Worries about cash flows are trending upward and that is consistent with the pressures coming from weak sales, running out of pandemic savings, still rising costs, and IRD bills falling due,” Alexander said.
Input cost concerns have stabilised, providing some relief in the context of easing interest rates.
Spending plans focus on strategy, customers, and social media
The survey also explored businesses’ spending intentions, revealing that many plan to allocate more resources to strategy development, customer retention, and social media presence.
However, spending cutbacks are still planned in several areas, including inventory levels.
Encouragingly, plans for investing in new equipment are showing an improving trend, a positive sign for sustaining economic growth.
Price increase plans remain modest
A net 19% of respondents indicated plans to cut or hold prices steady in the coming year, slightly less than the 26% reported last month but still supporting the downward path of interest rates.
Businesses continue to navigate the delicate balance between managing costs and maintaining competitiveness.
Hiring conditions improve as staff availability rises
The survey found that 17% of businesses reported finding it easier to secure good staff, reflecting the broader economic slowdown and lagging labour market adjustments.
As expectations for revenue and better business conditions improve, businesses are cautiously optimistic that these positive trends will extend to staff morale and mental health in the coming year.
Outlook for revenue and employee wellbeing
Since the low point in May, business expectations for revenue have strongly rebounded, boosted by recent interest rate cuts from the Reserve Bank.
While businesses expect improvements to extend to employee morale, Alexander, who also recently reported on easing credit conditions, cautioned that lingering economic uncertainties and potential layoffs may keep workplace sentiment subdued into 2025.
Read the Mint Business Insights with Tony Alexander here.
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