Three months ago, businesses told the New Zealand Institute of Economic Research they were looking at a bumper fourth quarter.Back then, businesses responding to the institute's quarterly survey of business opinion reported they expected the next three mo
Three months ago, businesses told the New Zealand Institute of Economic Research they were looking at a bumper fourth quarter.
Back then, businesses responding to the institute’s quarterly survey of business opinion reported they expected the next three months to be positive, by a net +13% on the institutes index.
The latest survey asked them how the quarter had gone – and the response was negative by -9%.
The latest survey shows continued optimism for the next three months but it is at the same level as it was three months ago.
“Firms are waiting for reality to catch up,” says the institute’s principal economist Shamubeel Eaqub.
“There is still a recovery happening, but the recovery as been shallower than firms expected.”
The survey is regarded by economists and policymakers as a major leading indicator for the economy but this time it appears the lag is longer than usual. Mr Eaqub warned three months ago he thought the responses at the time were over-enthusiastic.
“This [latest] survey shows over-exuberant expectations have been scaled back.”
This time he warns the lag could continue. Responses to specific questions about investment show an improvement but the net figure is still negative (from -8% to -2%) and although hiring intentions have moved into the narrowly positive (+1%) firms actual employment remains negative (from -29% to -18%). Nor is there much sign of firms restocking after firms let inventories run down during the recession, he said.
“What worries us is businesses are saying a lot of positive things but they are not acting on them…. this is pretty broad-based, but businesses are waiting for the recovery to come through but unless they act on it the recovery is going to be slow and gradual.”
There are some bright spots. Manufacturing, which is often one of the most pessimistic sectors surveyed, is holding up, not only in its expectations but also in its reported profits.
Manufacturing has had “the highest turnaround on record” in profitably, Mr Eaqub said.
That is partly due to a helpful Australian/New Zealand dollar cross-rate and also the high New Zealand/US dollar cross-rate helping with the cost of imported components.
