NZ Not Returning To Recession – MYOB Monitor

Media release: embargoed until 4.00am 18 August 2010

New Zealand Not Returning To Recession – MYOB Monitor

Despite signs of a slow and shaky recovery, New Zealand is not in danger of a double-dip recession, with over a third of businesses reporting more work or sales in the pipeline for the next three months, according to the August MYOB Business Monitor.

The August 2010 MYOB Monitor, conducted by Colmar Brunton, has shown the first major resurgence in New Zealand business revenue since the global financial crisis, with more businesses reporting revenue increases (31%) than those seeing a fall in revenue (26%) over the last 12 months. The figures are a reversal of the April Monitor, when 35% of Kiwi businesses reported a revenue decrease, compared to 26% whose revenue had increased.

MYOB general manager Julian Smith says although businesses have adopted a fairly conservative approach to the recovery in recent confidence surveys, the underlying performance highlighted in the Monitor points to a sound financial basis for the economy.

“Although many businesses have been disappointed with the pace of the recovery – and this seems to be reflected in confidence surveying – the financial performance data we collect shows some encouraging signs for the future,” says Julian Smith.

“Based on what businesses are telling us about the last 12 months of activity, and the amount of work they have in their sales pipeline, it’s unlikely we’ll see a return to recession.”

According to the Monitor, 43% of all business owners expect their revenue to increase over the next 12 months, while only 10% expect a reduction in revenue.

In the main centres, Wellington businesses have had the best quarter in some time, with 34% showing revenue increases, and 25% reporting decreases, compared to 37% showing revenue decreases in the April Monitor. Businesses in Auckland (28% increase and 26% decrease) and Christchurch (32% increase and 28% decrease) have also turned around revenue in the last quarter.

Julian Smith says the recovery is still unevenly spread through the economy, with larger businesses showing more pipeline work and higher expectations of increased revenue than micro businesses (less than 5 staff) and sole traders.

“There is a feeling amongst many very small business owners that the recovery is something that is happening to other people – and given the number of business owners in this group, this may be reflected in some of the confidence surveying,” says Julian Smith.

“But with small and medium sized businesses, we are seeing some very strong revenue expectations on the back of improved economic performance – and that should drive growth.”

Almost half (49%) of the medium sized businesses (20 – 199 staff) surveyed in the MYOB Monitor say they have more work or sales in the pipeline, with 43% of small businesses (5 – 19 staff) saying they have more work than usual in the next 3 months. 71% of medium sized business owners now expect revenue increases in the next 12 months.

“The Monitor also reinforces the view that there is still some fragility in the recovery – with significant numbers of business owners reporting falling revenues in several key industries,” says Mr Smith.

Businesses in the transport and construction and trades sectors report slightly higher levels of revenue decrease than increase in the August Monitor (transport: 24% increase in revenue and 25% decrease; construction and trades: 26% increase, 28% decrease), while the manufacturing and wholesale industry is evenly balanced between those reporting increases and decreases (both 29%).

However, each industry has shown steady improvements over the longer term, with the transport industry in particular bouncing back from 61% of business owners reporting revenue decreases in the November 2009 Monitor.

“Things are looking more positive in the short term for these industries too, with manufacturing, construction and transport businesses all reporting more work in the pipeline for the next three months than in the April Monitor,” says Mr Smith.

Julian Smith says in the current environment, business owners are still concerned about fundamental pressures on their performance.

“For the first time, cashflow is seen as the main pressure on doing business, with a third of business owners expecting to face cashflow issues in the next year, and a quarter expecting the timing of customer payments to be an issue,” says Mr Smith.

“Also one to watch for business: price margins and profitability is another key concern. This is particularly significant with the GST increase coming up on 1 October.”

“While we know nearly every business is aware of the GST change, most business owners are only now coming to terms with the scope of the tax changes, and how they affect their business.”

“To cope with this, we’re encouraging businesses to plan early for the tax changes on 1 October, take a good look at their systems – and especially their pricing policies – and get help from their accountant if they need it.”

The MYOB Business Monitor is a nationwide survey of over 1,000 New Zealand business owners, across a range of small and medium businesses, from sole traders to mid-sized companies, and representing the major industry sectors. The MYOB Business Monitor is designed to research key areas of business performance, including profitability, cash flow and pipeline work, as well as business confidence.

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