Wellington Regional Results

April 2008 - The April Quarterly Business Confidence Survey

Businesses show resilience as business confidence falls.

Business confidence in the Wellington region has fallen according to the Wellington Regional Chamber of Commerce’s latest quarterly survey but is holding up relatively well as the economy slows.

With significant increases in food and oil prices, a weakening property market and stubbornly high interest rates a fall in business confidence was not unexpected but the outlook is not all doom and gloom in the eyes of Wellington businesses. The survey was undertaken towards the end of April at a time when rising prices and talk of a recession were making the headlines.

Unsurprisingly, businesses are saying that economic conditions are a lot worse than they were 6 months ago (78% net). When asked about the next six months, things are also pretty grim with a net 52% expecting a deterioration in terms of the outlook (67% expect it to get worse and 15% better). But this is only slightly down from the net 49% recorded in the last survey three months ago.

Businesses’ expectations of their own situation, as opposed to the economy as a whole, are also slightly lower than last time but overall they are positive with a net balance of 12% more businesses expecting an improvement than a deterioration (see graph below).

This view is reflected in investment intentions with 74% of respondents expecting to make a major investment in the next 12 months, a level not untypical of recent years, and in employment intentions - which are up slightly for both full and part time employees.

One area where a slight softening is apparent is in the labour market where respondents are expecting some slight improvement in the ability to find new staff. This area is still tight however and workforce issues and staff shortages remained the most commonly cited issues expected to be faced by businesses in the coming months.

Confidence among exporters, while still low relative to recent years, has held up with a net 44% of exporters expecting earnings to improve in the next 12 months. This positive outlook may have something to do with the 7% fall in the TWI exchange rate that has occurred in the last two months or the FTA with China announced just prior to the survey.

When asked about the Wellington economy respondents to this survey are usually less pessimistic than they are for New Zealand overall - both in terms of outlook and the current situation. This was the case this time too but it is notable that the gap closed somewhat this time. One possible interpretation of this is that the Wellington economy is less shielded from a weaker property market and the softening consumption which is driving the current slowdown.