Auckland business confidence is holding firm

19 December 2003
Media Release

Auckland business confidence is holding firm, with high expectations of a busy retail and high tourism over summer months.

However, longer term there is a degree of uncertainty on the horizon, reflected by high expectations of rising interest rates, exchange rate uncertainty and a deep-seated major skill shortage getting even worse.

Seventy-eight per cent (78%) of Auckland businesses surveyed this week expect the economy to improve or remain the same during the next six months, exactly the same as a similar survey last September and marginally lower than the 82% rating a year ago when Auckland enjoyed an Indian Summer buoyed by America’s Cup and related activities.

Reinforcing the high optimism, however, is a finding that 30% of respondents believe the general business situation will improve over the next six months, compared to 24% in September’s survey.

In contrast, 19% of respondents believe the general business situation will get worse over the next six months, compared to 21% in September’s survey.

Also reinforcing the increased optimism around Auckland is a finding that 90% of respondents believe that their own business' situation will improve or stay the same in the next six months, consistent with the 91% who felt the same way at the December 2002 survey and the 88% at the September 2003 survey.

These are among the main findings of a regular survey of Chamber of Commerce members on how they view business prospects in the period ahead.

The survey was conducted by internet over the last three days. Of 600 responses analysed, 94% indicated that they employ 100 or less people.

Commenting, Chamber of Commerce Chief Executive Michael Barnett said the result is a huge expression of confidence as we go into a busy retail period, coupled with high expectations of visitors coming to Auckland from overseas and elsewhere in New Zealand over the holiday period.

“It is interesting that the overall level of confidence is holding up to the same level experienced last year when a key driver was clearly the America’s Cup, as well as tourism.”

“This is a ‘here-and-now’ survey of what 600 Auckland businesses said in the last few days,” said Mr Barnett, “and it is important that the optimism over the next few months is balanced against longer term question marks.”

In particular, Mr Barnett noted that expectations that interest rates will rise next year has increased from 45% last September to 77% in this survey.

Concern over skill shortages continues to increase, with 44% of respondents saying attracting suitable skills is getting harder, compared to 40% at the previous survey in September, and which in turn was up 6% from 38% on the March survey.

The skill categories most difficult to recruit are in manufacturing, trades, service sectors and tourism. “This is a major worry, given all these sectors are at the heart of the productive and growth areas of the economy,” said Mr Barnett.

Also, the comment section of the survey is peppered with references to exchange rate difficulties, to levels which have not featured in surveys over at least the last 18 months.

In other key findings:

On interest rate trends over the next 12 months, 77% of respondents believe they will rise compared to 45% in the September. Just 19% of those surveyed predict interest rates will remain the same over the next 12 months, compared to 43% in September. One percent (1%) believes interest rates will decrease compared to 9% in the September survey.

Both finance and demand continue to be the most limiting factors to businesses expanding their activity. Twenty-eight percent (28%) of respondents indicated that demand was the single factor most limiting their ability to expand, down from 32% in the September survey. As in previous surveys, finance was the next highest constraint (22%) and on a par with findings in all surveys over the last 12 months, followed by capacity (14%).

However, for SMEs (firms employing between 1 and 5 staff), 48% said finance is the most significant constraint compared to 41% who cited demand as the most inhibitive factor to growth.

In respect of emerging exchange rate concerns, typical comments were that the rising dollar is “starting to hurt us – A LOT!” and “confidence long-term is uncertain… the speed of change, and the magnitude of the change in the US/NZ dollar exchange rate is hurting us badly.”

((ends))

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