Business confidence weakens but ahead of key markets

News release

23 October 2013

NZ business confidence weakens slightly but ahead of key markets

Although New Zealand business confidence has dropped 8 percentage points to 34 percent in the last quarter, it is still well ahead of the global average of 8 percent and well ahead of several of our leading trading partners, according to the latest research from Grant Thornton’s International Business Report (IBR).

Of the 3,000 companies surveyed, New Zealand was ranked 16th with Peru being the most optimistic at 91 percent and Japan the least at -65 percent. Australia and the US were both ranked four spots below New Zealand on 19 percent, Singapore 16 percent, Mainland China 11 percent and the United Kingdom -12 percent.

Peter Sherwin, Partner with Grant Thornton New Zealand, said that the figures reflect the influence of the two major economic concerns in the world at present – the crisis in Europe, especially Greece and Spain and the slowing of the Chinese economy.

“When you look at the fall year-on-year, you get a pretty stark picture of the world economy. In Europe, French confidence is down at 41 percent, Netherlands 38 percent, Italy percent and Germany 20 percent, while in Asia, Singapore confidence has dropped 36 percentage points in the last year and Hong Kong 34 percent.

“Even Australia, the lucky country, is not spared. Confidence levels over there have dropped 9 percentage points over the last year compared with 4 percent in New Zealand.”

While New Zealand confidence levels are holding up in a depressed global economy, there are mixed messages from other statistics covered in the report.

“Of major concern is the number of companies highlighting the constraints being placed on their businesses by a lack of skilled staff. Half of the New Zealand businesses surveyed indicated that this was holding them back, an increase from 36 percent a year ago. Regulations and red tape was also noted by 46 percent of the companies, up from 26 percent a year ago.

“Also of concern was employment growth. We are almost at the bottom of the pile with a net 9 percent of companies having increased staff numbers in the last year. This is the sixth lowest figure in the world putting us ahead of Greece, Spain, Ireland, Poland and the Netherlands and just behind Japan and Italy.

“With the rebuild in Canterbury starting to accelerate, and the need for a sustained push to develop new homes in Auckland, these figures are alarming, and that is only looking at the building sector alone,” he said.

One bright note from the survey was the intention of 68 percent of companies looking to invest in plant and machinery and 38 percent in research and development. This is a lift of 14 percent and 16 percent respectively over the last year.

The growing handbrake for New Zealand Business’s is the shortage of a skilled workforce.

The game changer for the Government is to fund more intensive training for the unemployed and unskilled and to provide subsidies for business’s to create new jobs.

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