Businesses lose confidence in economic recovery

Less than half of businesses expect a full recovery by 2011 despite the economy's modest growth, according to the latest MYOB Business Monitor figures released today.MYOB New Zealand general manager Julian Smith told the National Business Review the latest survey revealed business owners had lost confidence in the pace of the economic recovery.“While we are definitely or technically in recovery, the MYOB monitors show us that that's not actually flowing through to business results yet.”

Less than half of businesses expect a full recovery by 2011 despite the economy’s modest growth, according to the latest MYOB Business Monitor figures released today.

MYOB New Zealand general manager Julian Smith told the National Business Review the latest survey revealed business owners had lost confidence in the pace of the economic recovery.

“While we are definitely or technically in recovery, the MYOB monitors show us that that’s not actually flowing through to business results yet.”

The latest figures reveal only 49% of SME business owners expect the economy will begin to improve over the next 12 months – down 6% from November last year when the previous survey was conducted.

“This seems to reflect Kiwi business owners’ actual experience of the recovery, as more businesses report decreased revenue and profitability and more modest gains in pipeline work at the end of the 2009/2010 financial year.”

According to the April survey, 35% of businesses reported a revenue decrease over the past 12 months, with almost half experiencing a revenue fall by between 20% and 39%. Twenty-six per cent of businesses reported increased revenue.

Mr Smith said Otago/Southland was the hardest hit region, with 38% of businesses reporting a continuous fall in profits. He said it corresponded with Otago/Southland’s colossal drop in employment, which was the highest in the country, with 18% of business reducing staff number over the past year.

“And good news for those business owners who have been doing it harder than most – 31% of business owners in Otago and Southland have more work in the pipeline in the next three months, compared to the national average of 29%, and 40% expect to see an improvement in profits over the next 12 months.”

Mr Smith told NBR that although figures show Auckland businesses have lost confidence in prospects for a recovery this year with a 16% drop since last November, the country’s biggest city will be “very much leading the way to the recovery.”

The latest survey indicates almost half of the Auckland business owners expect business revenue to increase over the coming year. Auckland businesses also expect a 32% increase in work volume over the next three months, compared to 27% across the rest of the country.

Mr Smith said the agriculture, forestry and fisheries sector reported the greatest improvement in pipeline work since the November survey, with 28% showing more work or sales than usual, compared to just 12% in the November survey.

But those businesses not expecting a full recovery within the next 12 months may be more realistic, as according to the New Zealand Institute of Economic Research the economic recovery will be even slower in 2011 with a 1.4% growth compared to 2.7% growth predicted for 2010.

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