NZIER’s QSBO shows demand holding up - Quarterly Survey of Business Opinion, April 2021
13 April 2021
New Zealand Institute of Economic Research (Inc)
Media release, 13 April 2021
NZIER Quarterly Survey of Business Opinion
Embargoed until 10am 13 April 2021
The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows a modest improvement in business confidence in the first quarter of 2021, while demand held steady.
A net 11 percent of businesses expect a worsening in general economic conditions over the coming months, on a seasonally adjusted basis. This is a modest improvement from the 16 percent of businesses which were pessimistic about the economic outlook in the previous quarter. Meanwhile, firms’ own trading activity was unchanged from the previous quarter. This measure suggests annual GDP growth will track around 2 percent in the March 2021 quarter.
Retailers most pessimistic of the sectors surveyed
The retail sector has become the most downbeat of the sectors surveyed, with a net 38 percent expecting a deterioration in the economic outlook. Although retailers report some softening in demand, the significant development has been the surge in costs in the retail sector. This is likely to reflect the effects of COVID-related supply chain disruptions, which are driving up shipping and freight costs and affecting retailers’ ability to restock shelves.
The building sector has also become more downbeat, despite a still solid pipeline of construction. Supply chain disruptions also look to be affecting activity, along with an acute shortage of skilled labour. Building construction firms report difficulty in finding skilled labour at levels last seen in mid-2017.
Cost pressures remain intense
Supply chain disruptions are contributing to the intense cost pressures across most sectors. However, firms are also finding it easier to pass on higher costs by raising prices. A net 8 percent of firms raised prices in the March quarter – a turnaround from the net 2 percent which cut prices in the previous quarter. Higher export-oriented dairy and fruit prices are supporting key regions. These results suggest a pick-up in inflation pressures over the coming year.
Firms positive about hiring and investment
Despite some uncertainty about the economic outlook, firms are continuing to plan for an increase in staff numbers and investment. A net 8 percent of firms increased staff numbers in the March quarter, and a net 18 percent plan to hire in the next quarter. Firms are also feeling more confident about investment, particularly in plant and machinery. Rising labour costs and the reduced ability of firms to bring in workers from overseas given border restrictions has likely sharpened the focus on investment in labour-saving technology.
Retailers particularly pessimistic about the economic outlook
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The New Zealand Institute of Economic Research has conducted its Quarterly Survey of Business Opinion since 1961. It is New Zealand’s longest-running business opinion survey. Each quarter we ask around 4,300 firms about whether business conditions will deteriorate, stay the same, or improve. The responses yield information about business trends much faster than official statistics and act as valuable leading indicators about the future state of the New Zealand economy. Long term series derived from the survey are held at the NZIER and are available to NZIER members via our website at www.nzier.org.nz.