NZD: NZIER Business Confidence in New Zealand drops 25% QoQ in Q1 ’24.
The NZ Business confidence for Q1 2024 came at 25% decline when compared to 2% decline in Q4 2023. The Business firms mostly affected by rising interest rates, inflation pressures cooling by dull demand from public and Net 20% of Finance sector expected higher interest rates returns in this year.
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The Quarterly Survey of Business Opinion (QSBO) conducted by the New Zealand Institute of Economic Research (NZIER) revealed a significant decline in New Zealand’s Business Confidence in the first quarter (Q1) of 2024. According to the QSBO report released on Tuesday, business confidence fell by 25% quarter-on-quarter (QoQ), marking a stark contrast from the 2% decline observed in the previous quarter, Q4 of 2023.
Further insights from the report include:
– The post-election surge in business confidence and activity, which was evident in the final quarter of the previous year, proved to be short-lived.
– On a seasonally adjusted basis, a net 24% of businesses anticipate a deterioration in the general economic outlook in the upcoming months.
– A net 23% of firms reported a decline in activity over the March quarter.
– Overall, the findings indicate that higher interest rates are achieving their intended effects by curbing demand to alleviate inflationary pressures within the New Zealand economy.
– Looking ahead, a net 20% of firms in the financial services sector anticipate higher interest rates in the next year.
NZD: NZIER Survey: Post-election business confidence boost short-lived.
The NZ Business confidence for Q1 2024 came at 25% decline when compared to 2% decline in Q4 2023. The Business firms mostly affected by rising interest rates, inflation pressures cooling by dull demand from public and Net 20% of Finance sector expected higher interest rates returns in this year.
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According to the latest Quarterly Survey of Business Opinion (QSBO) from the New Zealand Institute of Economic Research (NZIER), the post-election surge in business confidence and activity witnessed in the final quarter of the previous year was brief. In the March quarter, a net 24 percent of businesses anticipate a decline in the general economic outlook on a seasonally adjusted basis.
Similarly, firms’ own trading activity showed a downturn, with a net 23 percent reporting a decrease in activity during the March quarter. This contrasts sharply with the net 7 percent reporting increased activity in the previous quarter. The overall trend indicates that higher interest rates are effectively curbing demand to alleviate inflation pressures, though uncertainty regarding the new government’s fiscal policies is contributing to business caution.
The construction sector, in particular, appears pessimistic, with a net 54 percent of firms expecting a decline in the economic outlook. This reflects ongoing weakness in demand across housing, commercial, and government construction, leading to reduced pricing power and profitability in the sector.
Retailers are also feeling pessimistic, with a quarter expressing concerns about economic conditions in the coming months, driven by headwinds in the household sector. The looming repricing of mortgages and softening labor market conditions are likely to constrain discretionary spending.
In the services sector, confidence has fallen, with a net 22 percent of firms expecting a deterioration in the economic outlook. This has led to staff reductions as firms respond to weaker demand, despite a reversal in interest rate expectations among financial services firms, with a net 20 percent expecting higher rates in the future.
Weak construction demand is affecting the manufacturing sector, with a net 12 percent of firms expressing pessimism about economic conditions, reducing pricing power.
Businesses remain cautious about hiring and investment, with a net 11 percent reducing staff numbers in the March quarter. While hiring intentions for the next quarter are slightly positive, investment plans have weakened, with a net 14 percent planning to reduce investment in plant and machinery and a net 8 percent planning to reduce investment in buildings over the coming year.
Cost and pricing pressures are easing, suggesting a further decline in inflation. This supports forecasts of annual CPI inflation easing towards the Reserve Bank’s target band of 1 to 3 percent in the second half of the year, likely leading the central bank to consider reducing the OCR next year.
NZD: NZ Business Confidence Weakens in Q1, Think Tank Reports
The NZ Business confidence for Q1 2024 came at 25% decline when compared to 2% decline in Q4 2023. The Business firms mostly affected by rising interest rates, inflation pressures cooling by dull demand from public and Net 20% of Finance sector expected higher interest rates returns in this year.
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According to a private think tank’s report released on Tuesday, New Zealand’s business confidence weakened in the first quarter of the year, as businesses grappled with various challenges, including uncertainty surrounding the new government’s priorities. The New Zealand Institute of Economic Research’s (NZIER) quarterly survey of business opinion (QSBO) revealed that a net 25% of surveyed firms anticipated a deterioration in general business conditions, a significant increase from the 2% pessimism recorded in the previous quarter. On a seasonally adjusted basis, 24% of respondents expected business conditions to worsen, compared to 10% pessimism in the prior period. The survey also indicated a decrease in capacity utilization, dropping to 90.2% from the previous quarter’s 91.4%.
NZIER highlighted that the subdued sentiment reflected the challenges businesses are facing, including uncertainty surrounding the new government’s priorities, spending plans, public sector cutbacks, and the broader impact of higher interest rates on the economy. Consequently, weakened demand across sectors led to staff reductions in the first quarter, with businesses adopting a cautious approach toward hiring and investment for the months ahead.
The report also noted that cost and pricing indicators suggest a continued easing of inflation pressures in New Zealand, with fewer businesses reporting increased costs and raising prices in March. This development is likely to be welcomed by the central bank, which has been grappling with historically high levels of inflation. However, despite these indicators, the central bank is expected to maintain the cash rate at 5.5% during its upcoming meeting on Wednesday.
Christina Leung, Principal Economist at NZIER, emphasized in a press conference that the data indicates an increased risk of growth slowing sharply, rather than the previously anticipated “soft landing.” This assessment could potentially prompt the central bank to consider an earlier cut to the cash rate than NZIER’s forecast of May 2025.
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