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Business mood darkens further

"Gloomy" is how the New Zealand Institute of Economic Research describes the current business mood.

The institute's latest quarterly survey of business opinion (QSBO), released today, points to a drop in hiring intentions and a fall in output from most sectors, with a "sharp" fall in manufacturing.

The survey's index saw the outlook for the three months again move from a net -1% to a net -5%. 

That is consistent with a shift in annual GDP from a reasonably robust 2.6% in the year to June to around 1.5% for the calendar year, says the  institute's principal economist Shamubeel Eaqub.

Exports "remain positive, but are slowing", he says.

Retail is showing some unexpected strength, with a pick-up driven almost entirely by Auckland shoppers.

There is a strong regional variation in the latest survey: Auckland is growing relatively strongly, but everywhere else is relatively moribund.

The earlier pick-up in Canterbury activity has slowed.

As expected, some capacity pressures are emerging in Canterbury mainly due to a high demand on construction.

Aside from that, though, the Canterbury rebuild has "stalled, whether as a temporary blip or for more sinister reasons we don't yet know".

Retail is down and tourism numbers through Christchurch are "way down".

"There is something going on with the pace of the recovery there and we don't know what it is yet."

The drop off in the manufacturing sector has had a strong impact in the region, he says. "This is also part of the Australian slow-down story."

He does not buy into the idea that manufacturing is in a sudden crisis.

"Manufacturing has been in crisis since 1965, I believe, if you look at the long-term chart. We are not alone in this: the same decline has been going on for decades in places like the US and Europe."

Other sectors which slowed include the large services area.

"This is the largest part of the New Zealand economy and it is not normally volatile so the pull-back here raises a large question about how strong the recovery is."

The reported volume of sale of services fell 12% for the quarter. 

"Both financial and non-financial services weakened. I was a bit surprised by that because lending has been picking up."

Overall, Mr Eaqub says, "firms are struggling to raise prices in a slow recovery. Margins and profit remain under pressure".

"Investment intentions, while positive, are low compared to what we normally see in a recovery phase."

More by Rob Hosking

Comments and questions
8

Well what do you expect when our secondary industry has been squashed out of existence by imported low cost products from countries where their pay rates are below our minimum. Get real!!!!

Manufacturing in NZ will return to full on production when we dump
OSH and the Govt bearuacrats with all their petty regulations and people
can work as hard as their counterparts in China for the same pay rates
That is why manufacturing went to China in the first place
Regardless of how we feel emotionally about this, this is how it will be.
Otherwise we continue to decline and keep on borrowing money
to keep the show on the road when it is not sustainable any more

One of obvious things the government should be doing right now is to stimulate the building industry.
They should be offering a low or interest free loan of about 10% of the value of any new house to any first time owner. The house value should be under a certain figure. These measures would not apply to any existing house.
This would create more jobs, get the industry moving and most of all, all houses need home appliances, carpets etc. which again creates jobs.
This would also bring back the crazy house prices in Auckland.
Our politicians are sitting on their hands and do not want to do anything that effects their self interests.
Most have numerous rental properties!

This is very good news, given the strongly negative correlation between business confidence and actual prospects

Sinister implications in Christchurch? How about blithering incompetence where red tape and Fletcher's strangling bureaucratic attempt to clip every ticket has resulted in backlog, stagnation and few independent suppliers even making it to being able to build, fix, or repair anything.

Fletcher's and ultimately National for allowing them monopoly, are endangering the National economy. I intend to Punish the Government at the elections.

When is Govt going to wake up to the fact that the reserve bank's low interest rate policy is depressing confidence?
Never it seems!
Only when Govt and reserve bank adopt a policy that attracts savings will we start to build some domestic investment capital which is essential for economic revival.
Until then we will bumble along,heads in the sand,on our way to progressive decline.
A major policy change is imperative!
liberte

Shanes on the money re Ch-ch, the incopetence and red tape is killing dead getting anything done, its incredible. But the main culprits are the insurance companies, untill they are forced to get there act together and put more resources into settling claims ( they are getting much worse not better) then it's not going to stall down here its going to be more like grinding halt and should not come as a surprise!

What is everbody talking about?
We don't have a housing crisis in Auckland
and we certainly do not have a manufacturing crisis.
In fact , the economy is booming!!

ASK John Key!!