Business credit enquiries fell 7.3% year-on-year during the December 2021 quarter with Covid-19 restrictions throwing a wet blanket on business confidence, data from credit bureau Equifax New Zealand shows.
Equifax attributes a 14.8% drop in business loan enquiries to the industries most affected by Covid restrictions: hospitality, retail and education.
There were exceptions, such as New Zealand’s agriculture, forestry and fishing sector, which saw increased credit demand of 10.3% during the December quarter.
"The strong demand for New Zealand’s key agricultural commodities is driving vehicle and equipment purchases," said Angus Luffman, managing director at Equifax.
Consequently, finance enquiries rose, “buck[ing] the trend in the December quarter, with demand up by 7.6% [y/y], driven by those sectors with the strongest fundamentals,” said Luffman.
The construction sector is in a 'watch this space' pattern: business credit demand remains strong but the sector is up against, mostly Covid-19 related, growth constraints such as labour, supply chain or the increasing costs of materials.
"These are all factors that contribute to tightening balance sheets and profit margins,” said Luffman.
Trade credit demand weathered the lockdown storm reasonably well, falling only 1.7% y/y.
“The December quarter was a mixed bag for trade credit, with increases in credit demand amongst the manufacturing, construction and primary industries, offset by weak credit demand in the hospitality and services sectors.
"Overall trade credit demand is yet to recover to pre-COVID levels, demonstrating that the broader impact of the pandemic remains very real for the wider trade and small to medium enterprise sectors of the economy,” said Luffman.
Last week Centrix, another credit bureau, questioned if we were facing the next big credit crunch as banks became increasingly conservative since changes tightening up the Credit Contracts and Consumer Finance Act (CCCFA) came into effect on December 1.
Centrix pointed to weaker consumer credit demand figures for January, which fell 14% year-on-year and echoed the construction sector conundrum of strong credit demand being undermined by labour and supply chain issues.
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