Auckland Business Confidence Stumbles - Again

17 June 2004

Auckland Business Confidence Stumbles - Again

Auckland businesses are predicting the down turn in the economy that emerged earlier this year to continue over the next six months.

Ninety per cent (90%) of Auckland businesses surveyed late last week expect the economy to deteriorate or remain the same during the next six months.

This outcome compares to the 85% of businesses surveyed in March, and just 67% last December who were expecting the economy to deteriorate or remain the same during the next six months.

Reinforcing the increasing mood of pessimism that has emerged over the six months, 40% of respondents believe the general business situation will get worse over the next six months, compared to 36% in March and just 19% in December’s survey.

Just 9% of respondents believe the business environment will improve in the next six months, compared to 14% in March and 30% six months ago.

Difficulties in recruiting staff continue to get worse, with 47% of businesses now saying that recruiting skilled staff is harder than three months ago (compared to 42% in March) and 20% saying recruiting unskilled staff is more difficult than three months ago (compared to 17% in March).

Ninety per cent (90%) of respondents expect interest rates to rise over the next 12 months, compared to 73% in March and just 9% in last year’s June survey.

These are 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. Of about 470 responses analysed, 95% indicated that they employ 100 or less people.

Commenting, Chamber of Commerce Chief Executive Michael Barnett said the outcome was predictable but very disappointing.

“Given the warning signs in recent weeks over interest rates and difficulties businesses are having in recruiting suitable skilled staff, the continuing decline

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in business confidence was predictable.

“At the same time, it is a disappointing outcome because it shows that as a nation we are not taking up opportunities to address the core concerns of business around building a growth-led economy”.

“The growing shortage of skills has been signalled over a period of years and there is now an urgent requirement for Government to unveil a serious strategy to address this and other concerns of business, such as our tough regulatory and compliance environment.

“This is a ‘here-and-now’ survey of what Auckland businesses said in the last few days, and shows very clearly that many businesses do want to expand and grow but cannot because of factors such as the skills shortage” said Mr Barnett.

This view is reinforced by the detailed findings:

The 47% of respondents citing difficulties finding experienced skilled staff is the highest level this indicator has been since the survey began five years ago.

The areas of greatest shortage are in the service sector, at 62%, up from 52% last March, and skilled manufacturing positions at 57%, an increase of 13% since March. Another area of worsening skill shortage is in information technology, where 34% of businesses are now reporting it is harder to recruit, a 10% jump on the survey results to the same question throughout last year. Reinforcing the entrenched pessimism around Auckland is a finding that 58% of respondents believe their own business’ situation will deteriorate or stay the same in the next six months, compared to 57% in March and 44% last December.

On interest rate trends over the next 12 months, 90% of respondents believe they will increase compared to 9% a year ago. Just 8% of those surveyed predict interest rates will remain the same over the next 12 months, compared to 29% a year ago and 19% last December. Not one respondent (0%) now believes interest rates will decrease compared to 2% in March and 56% a year ago.

Demand continues to be the most limiting factor to businesses expanding their activity. Thirty-one percent (31%) of respondents indicated that demand was the single factor most limiting their ability to expand, compared to 33% in March and 28% in the December survey.

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However, in another first for the survey, labour (20%) has headed finance (17%) as the next most limiting factor to businesses expanding their activity. The next most limiting factor to business expansion was capacity (16%).

However, 93% of small-medium enterprises (SMEs), employing 20 or less staff cited finance as the single factor most limiting their ability to expand, followed by demand (70%).

ENDS