Business confidence sours in December quarter

NZIER principal economist Christina Leung says "It appears uncertainty over the new government policies have made businesses even more downbeat."

New Zealand firms turned pessimistic about the country's economic fortunes in the December quarter for the first time in more than two years, with the formation of a Labour-led government and its policy plans spooking businesses.

A seasonally adjusted net 11 percent of firms surveyed in the New Zealand Institute of Economic Research's quarterly survey of business opinion expect economic conditions to deteriorate in the first half of this year, turning negative for the first time since September 2015, and falling from a positive reading of 5 percent in the prior period.

The headline confidence reading is more pessimistic than firms' own trading with a net 10 percent experiencing increased activity in the December quarter and a net 18 percent anticipating more demand in the first three months of 2018. The decline in trading activity indicated slower economic growth although NZIER principal economist Christina Leung said it was more a moderation and she expects annual expansion of 3 percent.

"Business confidence had fallen in the previous quarter ahead of the general election, and it appears uncertainty over the new government policies have made businesses even more downbeat," Leung said in a statement. "Business may be worried about the outlook for the New Zealand economy under the new Labour-led government, but for now that is not reflected in demand in their own business."

The NZIER survey is a key metric of business sentiment watched by the Reserve Bank and typically tracks closely with the ANZ Business Outlook, which was at an eight-year low last month. Firms have become gloomier since the formation of the Labour-led government, with questions hanging over what impact its policies will have on industrial relations and how effective it will be reconfiguring the property market.

Leung said previous surveys show business confidence tends to drop when Labour takes office and increase when National is in charge, but that sentiment has a muted impact on actual trading activity.

The QSBO showed profitability continued to weaken in the December quarter, with a net 7 percent reporting lower earnings and a net 6 percent anticipating reduced profits in the coming quarter. That compares to a net 6 percent experiencing lower profits but a net 13 percent expecting increased earnings in the September survey.

Leung said the decline in expectations was a "worrying development" with fewer firms predicting conditions will recover in coming months. That increased uncertainty showed firms were more cautious about investment, she said.

The QSBO showed a net 2 percent of firms plan to invest in compared to 18 percent in September, while a net 10 percent plan to lift investment in plant and machinery, down from 17 percent, while hiring intentions declined to 12 percent from 19 percent.

Firms are still finding it hard to find labour, with a net 49 percent saying skilled labour was hard to find, deteriorating from 46 percent in September, and a net 31 percent finding it hard to attract unskilled labour, compared to a net 27 percent in the prior period.

Companies still expect to face cost pressures, with a net 38 percent anticipating an increase in costs compared to 24 percent in September, while experienced costs were largely unchanged with a net 29 percent reporting higher costs compared to 30 percent in the prior period. Pricing intentions increased with a net 31 percent expecting to lift prices in the coming quarter, up from 24 percent in September, while a net 18 percent raised prices in December, compared to 17 percent in the prior period.

(BusinessDesk)


10 · Got a question about this story? Leave it in Comments & Questions below.


This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

10 Comments & Questions

Commenter icon key: Subscriber Verified

Not surprising: Just about all the current ministers would be flummoxed running a local dairy shop, yet alone, have an understanding of Big Business

Reply
Share
  • 1
  • 1

I suspect business concerns are centered around the inexperience of the coalition and what appears to be over promises that cannot be delivered eg Housing and Trees . The appointment of Michael Cullen to the tax working group indicates a clear political agenda for a capital gains tax and with it an impression that Labour at least has an agenda that will prove to be business unfriendly and likely to be the financial disaster for NZ as history of socialists governments in NZ and globally demonstrate. Its early days and I hope to proved wrong.

Reply
Share
  • 1
  • 1

Contrast our results to those of the US where business confidence soared after the election of Donald Trump and where they have soared again to new heights following the US tax cuts.

Meanwhile, our tax cuts which would have had a similar effect in boosting confidence here were canceled by Labour and NZF for bribes, and to buy votes for themselves in future elections.

The US stock markets are at record highs and the US unemployment rates are at historic lows. The Americans are feeling very confident about the future whereas in the worker's socialist paradise of New Zealand...............

Reply
Share
  • 1
  • 1

Labour's communist ideals have an adverse effect on business and our economy.

Continued attack on housing is effecting consumers and business directly.

Labour overlooks the fact that their voter base are hard working family home owners.

Reply
Share
  • 1
  • 1

Labour are renowned socialists, never give tax relief to business, just try to cut of the hand that feeds them,to give to people who do nothing, always have done and always will do, tax tax and more tax.

Reply
Share
  • 1
  • 1

Ridiculous blindness at play here. Relief to businesses is exactly what they gave them when they introduced Working for Families, which is nothing more than a subsidy for company wages. John Key called it "communism by stealth" but then did nothing about it, and Bill English campaigned on increasing these wage subsidies - along with subsidies to landlords via the Accommodation Supplement.

Not that much between our two main parties when it comes to redistribution to businesses and property investors, unfortunately.

Reply
Share
  • 1
  • 0

The Coalition of Losers will continue to attack hard working citizens and prop up the lazy and feckless. This is what Socialist do. Remember only a few short years again the PM was President of the International Youth Socialist League and referred to as "the Commie chick from New Zealand"

By the end of the year unemployment will have risen inflation will have risen interest rates will have risen as the rest of the world takes fright with a Government of amateurs and loose fiscal discipline.

At that point the Coalition of Losers will be desperate to cling onto power with the next election less than 24 months away. It will bring in a range of measures increasing taxes so was to increase welfare benefits to offset the increases in rents by landlords who have to cover the costs of the government legislation around their properties plus the increasing shortage of rental accommodation. More welfare for private landlords.

Reply
Share
  • 0
  • 1

We don't need interest rates to go up with everything stable at the moment, if they do a lot of people would lose their shirt, and probably lose everything they have worked hard for to get ahead in life.

Reply
Share
  • 0
  • 0

Warm fuzzies and telling other world leaders how to think and act will do nothing for our economy. Jacinda is failing at the real job of actually running a country and inspiring business. No Labour minister has the first clue about running a business, the closest would be Jacinda working behind the counter at her parent's fish and chips shop on the rare occasion. Very disappointing.

Reply
Share
  • 0
  • 1

Whole heartedly agree with your comment, look at what the Donald is doing in the USA to stimulate growth.

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.

NZ Market Snapshot

Forex

Sym Price Change

Commods

Commodity Price Change Time

Indices

Symbol Open High Last %