NZIER's QSBO shows pre-election business confidence jitters, Quarterly Survey of Business Opinion - October 2017

03 October 2017

New Zealand Institute of Economic Research (Inc)
Media release, 3 October 2017
NZIER Quarterly Survey of Business Opinion
Embargoed until 10am 3 October 2017

The latest NZIER Quarterly Survey of Business Opinion shows business confidence fell in the September quarter, with only a net 7 percent of businesses expecting an improvement in general economic conditions.

A decline in business confidence is not unusual heading into a General Election, as businesses and households hold off committing to major spending plans given the uncertainty over the formation of the new Government.

Economic activity has come off the boil, but firms expect better things to come

Firms also reported an easing in demand in their own business, with 13 percent of businesses reporting increased demand – a drop from the 17 percent in the previous quarter. Businesses are optimistic about a rebound in demand in the next quarter, with a net 27 percent expecting stronger demand ahead.

There was a decline in business confidence in most regions, with Northland a notable exception. Confidence in Northland lifted sharply, perhaps buoyed by election campaign promises of major spending on infrastructure in the region. Confidence in the main regions Auckland, Canterbury and Wellington softened, with pessimists outnumbering optimists in Canterbury.

Lower confidence in the building and services sectors

There was a further drop in confidence in the building sector from 18 percent to 3 percent. June quarter GDP had shown another contraction in construction, and indicators suggest further softening in construction activity is likely in the near term.

Profitability in the building sector has also deteriorated, as building sector firms are finding it more difficult to pass on rising costs.

Confidence in the services sector also dropped sharply, driven by weaker demand in the financial services sector. This reduced demand in the financial services sector reflects the slowing in housing market activity.

Firms still planning for expansion

Despite lower confidence and demand, businesses’ hiring and investment plans remain positive. Businesses report increased difficulty in finding unskilled workers, while shortages for skilled labour remain acute.

Capacity utilisation eased further in the September quarter, while pricing indicators remained reasonably steady. Overall, there remains little urgency for the Reserve Bank to begin lifting interest rates. We expect the Reserve Bank will leave the Official Cash Rate on hold until at least late 2018.

Businesses more cautious heading into the General Election

Source: NZIER

For further information please contact:
Christina Leung
Principal Economist & Head of Membership Services
Ph +64 21 992 985 | Email christina.leung@nzier.org.nz

Background

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.

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