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July 2010 - Significant fall in business confidence
The Wellington Employers' Chamber of Commerce's July business confidence survey recorded a significant fall in confidence as businesses realised that recovery from recession was going to be harder than many anticipated.
There are still more businesses expecting an improvement in economic conditions than there are expecting a deterioration but the relative numbers of optimists has fallen as businesses have had a reality check as to the fragile state of the economy.
Over the next six months a net 27% of respondents expect the New Zealand economy to improve (46% expecting an improvement, 19% deterioration). This is down from the net 56% recorded three months ago.
When asked about their own activity, respondents were more optimistic with a net 35% of businesses expecting their own business situation to improve over the next six months (47% expecting improvement, 12% deterioration). But this is also down from 63% recorded in the last survey.
The overall reduction in confidence is also reflected in exporters' outlook. A net 30% of exporters expect earnings to improve down from a net 53% last time.
Of some concern for the near term outlook is the reduction in both investment and employment intentions.
21% of respondents said they expected to increase full time staff. While this is still positive and points to some job growth, it is significantly lower than the 34% recorded at the time of the last survey and suggests that job growth over coming months will be slower than anticipated.
Likewise the proportion of businesses expecting to make a major investment in plant or equipment over the next 12 months has fallen from 31% to 29% pointing to less capital investment than is desirable at this stage of the recovery.
When asked to comment on issues of concern, lack of demand and decreases in sales were commonly cited by businesses, which suggests significant belt tightening is occurring. The timing of this survey coming just after the Reserve Bank's July OCR increase may also have been a contributing factor to the lower confidence.
