A new survey has found that making sales has become the biggest challenge for businesses in the first three months of the year, overtaking the shortage of labour for the first time since 2021.
The New Zealand Institute of Economic Research’s latest Quarterly Survey of Business Opinion found 41% of firms now report sales as being the primary constraint on their business, ahead of 29% which reported finding labour as the main limit.
NZIER, which has conducted the survey since 1961, said this showed that capacity pressures in the economy were easing as the Reserve Bank of NZ (RBNZ) lifted the Official Cash Rate (OCR).
Finding labour has been named as the top constraint for businesses in every survey since September 2021. However, the RBNZ has been trying to bring demand more in line with supply, while the reopened borders have allowed overseas workers to enter the country.
In the same survey a year ago, just 26% of businesses said making sales was their biggest constraint.
Other inflation indicators in the survey were mixed, with less businesses reporting higher costs but also a slight increase in those increasing their prices.
“Nonetheless, the weakening demand has flowed through to a deterioration in business profitability, with over half of firms surveyed reporting a decrease in their profits over the March quarter,” NZIER said.
A net 34% of firms said their profitability had declined in the past three months and a net 33% said it would decline in the next three months.
The overall results of the survey showed improvement from the December quarter – which was one of the weakest results since the 1970s – with a net 61% of businesses in the latest survey expecting the economy to deteriorate (up from an all-time low of 73% expecting deterioration in the December quarter).
A net 76% of the building sector expect economic conditions to worsen in the coming month, and architects’ measure of their own activity suggests a further slowdown in housing and commercial construction.
The retail sector was also pessimistic, although less so than in the December quarter. Demand remained weak and cost pressures were weakening profitability in the sector.
A net 68% of services sector firms were downbeat about the general economic outlook. Although demand was subdued, more firms raised prices in the March quarter.
Principal economist Christina Leung said the key question for RBNZ was whether this traction would continue in the economy.
NZIER’s survey is the longest-running business opinion survey. It asks about 4,300 firms about economic conditions each quarter.
36 Comments
Wowwwwwweeeeee ! .... Doctor Doom & Gloom , Nouriel Roubini , wishes he'd written this report ... heavens to Murgatroyd , what a tale of woe ...
... Mr Robertson , Grant .. yes ... ummmm , how do you rate your attempt to transform NZ ... all going according to plan ?
Can someone tell the RBNZ that their Shock and Orr tactics during COVID and in fighting inflation has been a massive strategic failure?
(Actually, I think they already know this. But they'll persist tomorrow with another OCR rise and more tough talk that'll ensure economic armageddon comes a step closer. These guys - controlled by nothing and answering to no one are out of control and drunk with power.)
Yes. Quoting from Richard Werner, imagine if this thinking was top of mind, then things would have been more manageable.
However, QE’s subsequent depiction as a form of “magic money tree” is misplaced. In my 1997 paper and subsequent book, I stressed the difference between newly-created money when it is used for productive purposes – in other words, for business investment that creates new goods and services or increases productivity – and when it is used for unproductive purposes such as financial asset and real estate transactions. These merely transfer ownership from one party to another without adding to the nation’s income.
If new bank credit is used for productive business investments such as loans to small firms, there will be job creation and sustainable economic growth without inflation. Furthermore, this growth – if pumped into the economy via many small retail banks to even more small firms – would have the additional benefit of leading to more equitable wealth distribution for all.
https://fortune.com/2023/03/20/is-federal-reserve-too-powerful-inflatio…
You don’t hear peep from the business organisations. Sure survey results of this struggle or that. But can someone tell me how the hell Business NZ can put on a straight face when there are movies like The Big Short showing exactly what happened in the US. We seem to have followed the script…..how and why is that?
Business NZ represent 80% of businesses, having assimilated many groups.Their CEO is Kirk Hope previously ran the bankers association and ex Westpac.Phil Oreily his predecessor was also ex Westpac.
What’s Simon Bridges got to say? Go for ten million people. And that’s about it. How did he end up running the Chamber? He wouldn’t have the faintest idea of working in or owning a business. It’s all politics and greed.
Many businesses won’t go well with falling revenues. Wait till the big businesses start shedding staff. It’s not going to be pretty.
You can’t just turn on exporting businesses. They take years to start and build up. But you can fcuk them overnight by having an overvalued dollar and starved of capital as it flows into unproductive pursuits.And that is what we have done.
I don’t think anyone realises what a shit burger the country is possibly about to eat.
30b dollar current account deficit and a large part of our economy relying on houses being sold at unaffordable prices forever!
what a setup folks
Yip - big wake up call for people in NZ.
Most didnt understand what PaulC (?) the reserve bank economist meant when (last week) he said we were all poorer as a result of everything that happened in last few years (pandemics, russia war.. everything external except RBNZ actions)
We are all about to wake up to realise the emperor (nz) has no clothes (money or means to make money) and our businesses have mostly been living on the back of wealth from increasing house prices... resulting from low interest rates...
very interesting times. i expect an exodus of smart young people to australia and a few years whinging from those left behind
You've been cheering on the interest rate hikes, because you relish house values dropping. Some, including myself, have been warning that the higher interest rates will affect everyone. It seems the penny may now be dropping for you!
Taking a bit of liberty there Dr Y. I would say you're rather late on to the idea of how burst bubbles affect everyone.
What bothers me is that the so called " experts " ... highly paid experts at that , Robbo & Orr didnt realize that we were already in a gigantic house price bubble before they began flooding the system with untold 10's of $ billions of ultra cheap credit and spending up like drunken sailors on shore leave , all in the name of Covid19 , a virus ....
Robbo & Orr didnt realize that we were already in a gigantic house price bubble before they began flooding the system with untold 10's of $ billions of ultra cheap credit and spending up like drunken sailors on shore leave , all in the name of Covid19 , a virus ....
Not selected to be in their positions on their wisdom and good judgement.
They all knew. everyone had their nose in the trough and noone wanted to be the one to spoil the feast.
Now they are all hiding behind the same justification - blaming external events.
very soon Orr may wish his contract hadnt been renewed and hipkins will realise why Ardern really jumped ship - last 20 years have been like musical chairs .. everyone wanted to play but noone wants to be the last one standing
That's a pretty skinny view, unless you believe every business is trying to rip you a new one and you checked it on the internet so it must be true.
I know in my own business we have seen a sales increase, mirrored by a cost increase resulting in a repeat profit performance.
We put prices up, because our suppliers jacked prices. I've had many arguments with them, because the market here is small, we, along with many importers, have negligible leverage.
Many commenters essentially predicted this a long time ago. Even I, as not formally educated in the financial arts, was able to argue that the Government, through the RBNZ could not pump large quantities of money into the economy without regulating it's use, without some pretty ugly outcomes. My predictions including the banks hoovering all that money up one way or another, and look, this year they report record profits! Go figure?
Why Bank profits are so high
https://www.downtoearth.kiwi/post/the-gov-t-is-considering-spending-meg…
Some price rises I understand and appreciate that suppliers are struggling to stay competitive. There are a bunch of other prices that make no sense whatsoever. And it is clear that they are using "inflation" situation as an excuse to price gouge. I am putting our credit card away with these folks. They need to adjust their thinking or go broke. I think that we are well over due for some very hard times so that businesses and some customers can be reacquainted with reality.
You are doing the right thing. Employers need people that can afford it to support them so they in turn can keep employees and provide services to the wider community. If people want an economy with less restaurants, less services, less competition, then hope for businesses to fail and people to lose their jobs and support the left wing persecution movement. I applaud you.
Absurd comments. Suppliers set prices consumers accept them or not. Businesses don't dictate prices. Wishing for hard times is typical left wing lunacy. You should get psychological help to understand why you would wish this sort of thing on your fellow countrymen.
Banks (and our other cartels) dictate to users. It's called market power. Getting that power is their primary business model. Last thing they want is a real market.
Our so called protectors, the civil service, are blind to this, even as it dances in front of them.
Inflation is happening globally not just in NZ. Why is it then that the Reserve bank thinks it needs to step in so heavily?
Where is the actual research showing that inflation in NZ is largely the result of low interest rates versus manufacturing and raw material supply issues caused by unprecedented lockdowns of entire economies globally?
Perhaps a qualified economic journalist could show us some empirical evidence.
A patriotic New Zealand reserve bank governor would do everything to keep interest rates as low as possible and only raise rates with extremely solid empirical data, then act quickly to reduce them. Keeping the NZ Economy and businesses growing should be top priority. NZ cannot control global inflationary pressures.
The local and central governments in this country seem to specialise in persecution of citizens and industries. When will we ever see support for encouragement and development of what really drives an economy: Production and supply of goods and services.
Declining revenue was step 4 on the 6-step program to economic recovery that I posted back in January.
Step 5 was increased unemployment, and step 6 was the feedback loop of increasing unemployment causing reduced revenues, leading to more job losses.
For step 3 I had said a reduction in prices to grab more customers, and although retail prices across the board have risen on the backs of supplier prices hikes, banks are now offering lower-rate specials or cash incentives, so I wasn't entirely off-the-mark.
My real worry is that monetary policy changes take a year or so to have an impact, and there has not been enough time since the 75 bps rise in November and the 50 bps rise in February to see what they do. Everything happening now is due to the successive increases made from early to mid 2022, and most likely the suggestion of increases in the future.
Sorry to say that I don't trust Robertson or Orr to make the right choice, and I suspect they will throw this country into a much deeper recession than is needed.
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