Worst Still To Come On Inflation, Business Survey Shows

Nearly 80% of businesses expect inflationary pressures to get worse over the next year, the latest Central New Zealand Business Confidence Survey has found. A similar number expect they will have to raise prices in the coming year as inflation reaches a boiling point across the economy.

The survey of over 200 senior business leaders in the Central New Zealand region was conducted in the first half of October. It found inflationary pressures as a major concern, with businesses not yet seeing the light at the end of the price increase tunnel.

There was a silver lining in the survey, as overall expectations ticked up from record lows in July. Expectations for the New Zealand economy increased to a net result of -45%, from -62% in July. The improvement was driven by a shift from businesses predicting the economy would get worse, to predicting it would remain the same. "There are signs of a cautious lift in confidence," said Simon Arcus, Chief Executive of Business Central and the Wellington Chamber of Commerce, who conducted the survey.

"But cost pressures remain high and are a drag on growth. Producer prices are running well ahead of consumer prices, and although businesses are doing everything they can to avoid passing on costs there is a limit to this. What’s more, they are paying higher prices for goods and services themselves"

The inflationary pressure is exacerbated by the country’s ongoing labour shortage, with 90% of businesses experiencing heightened wage pressures, and being unable to meet customer demand due to worker shortages. Over half of respondents said the labour shortage was their largest barrier to business.

Businesses also cited ongoing supply chain issues, rising energy prices, and the fall of the NZ Dollar as key contributors to inflationary pressure.

Other businesses began to express concern as to whether customers would maintain spending habits, as the price of essentials continued to rise.

"We’re keeping a close eye on business inventories for an early indication on whether consumers are cutting back," said Simon Arcus. "Rising prices and a risk of slowing demand means a deeply uncertain time to run a business."

The unpredictable environment has taken its toll on business. "We have never felt as fatigued as we do now in terms of our business and the challenges, we can see facing us," one respondent said. "It is never-ending, and the stress has taken so much joy out of what we do."

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