NZIER’s QSBO shows businesses gloomy as costs rise and profitability gets squeezed, Quarterly Survey of Business Opinion, April 2018

New Zealand Institute of Economic Research (Inc)
Media release, 10 April 2018
NZIER Quarterly Survey of Business Opinion
Embargoed until 10am 10 April 2018

The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows businesses continue to expect a deterioration in economic conditions over the coming months. Business confidence had fallen sharply in the December 2017 quarter in the wake of the new Labour-led Government taking office, and this pessimism has carried over into the first quarter of 2018.

This continued pessimism about the economy remains in contrast to firms’ expectations about demand in their own business, which continues to hold up. A net 15 percent of businesses nationwide reported a lift in demand in their own business in the March 2018 quarter.

A net 9 percent of businesses expect worsening economic conditions over the coming months – slightly less than the 11 percent in the previous quarter. This pessimism was pervasive across most regions including the provinces, with businesses in Manawatu-Wanganui, Marlborough and Gisborne particularly downbeat.

Weak profitability and higher labour costs are starting to bite

Continued weak profitability appears to be a key contributor to this pessimism, and businesses are not optimistic this will improve. Cost pressures have intensified, and businesses have not been able to fully pass these on in the form of price increases.

Confidence in the retail sector has been particularly weak since the new Government took office. This likely reflects that a large proportion of its workforce is low-waged, which means retailers are more likely to be affected by the lift in the minimum wage and the abolition (for businesses with greater than 20 workers) of the 90-day trial for new employees.

Businesses are turning to labour-saving technology

With labour costs rising and labour shortages still acute, firms have become more circumspect about increasing headcount. The easing in hiring intentions suggests slower employment growth over the coming year.

In contrast, investment intentions for plant and machinery have rebounded with a net 17 percent of businesses indicating they plan to increase investment in plant and machinery over the coming year. With labour costs increasing, firms may be looking to mitigate cost pressures by investing in labour-saving technology.

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

 
Businesses downbeat across most regions

Source: NZIER 

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 at www.nzier.org.nz.