Auckland Region Business Outlook Weakens

Auckland Region Business Outlook Weakens

The latest Auckland Chamber of Commerce business opinion survey points to a general deterioration in a number of important performance indicators.

The Chamber’s quarterly survey provides an important snapshot of where small and medium Auckland region businesses think they are headed as 81% of the 1000 surveyed employ 20 or fewer staff.

Auckland Chamber of Commerce chief executive Michael Barnett says businesses are significantly more pessimistic than they were in December. “This has to be of concern when the region generates more than a third of New Zealand’s productive economic activity, and small and medium businesses provide most of the engine’s cylinders.”

Mr Barnett says a “stand out” survey finding was that 64% of the survey respondents expect the general business situation in New Zealand will deteriorate in the next six months. This is an 80% increase on those who thought so in December, and three times as many who were pessimistic a year ago.

The number of business owners expecting the performance of their own business to deteriorate nearly doubled between December ( 17%) and this month ( 31%). Just 11% expected this outcome a year ago.

In other findings, more businesses expect:

softer demand for staff over the next three months; to make less investment in buildings and machinery over the next year; that significantly higher costs will squeeze profitability over the next three months; significantly less demand from New Zealand customers over the next quarter; that interest rates will rise further over the next year.

Mr Barnett says 65% of respondents now expect interest rates to rise during the next year, up from 50% in the December survey. “Coupled with this is the suggestion that mortgage rates will go still higher, despite the Reserve Bank not lifting the official cash rate. With many small businesses using borrowings secured against mortgages this will obviously have an impact.”

Barnett adds, “The ability of business to absorb further price increases appears to be over if as the survey suggests demand and turnover are headed south.” “Perhaps rather than pushing huge State driven capital projects it may be time to invest in the “business engine” (the Golden Goose for the last 8 years). If not which ever party wins the Treasury benches risks inheriting an economy in danger of turning ice cold.

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