Economic Outlook Brightens As Interest Rates Start Falling

August 30, 2024

Canterbury businesses are showing renewed optimism about the economy according to the latest Business Canterbury survey, which opened in the days following the first interest rate cut in four and a half years.

Business Canterbury chief executive, Leeann Watson says "This rise in confidence is a welcome sign for the business community and our local economy.

"We're seeing quite a large improvement in expectations for both the Canterbury economy and individual business performance, a big turnaround from what we saw in the results from May.

Key findings from the survey include:

- 53% of businesses expect a stronger Canterbury economy over the next year, up from 26% last quarter

- 57% anticipate stronger financial performance over the next year, compared to 45% previously

- The top three concerns for businesses are consumer confidence and demand, interest rates and inflation, and productivity and growth.

"These results are early indications that the recent drops in inflation and interest rates are having a positive impact on the business operating environment, despite challenges remaining for businesses who have been through what has felt like an elastic band economy over the last few years.

"Expectations around investment and recruitment haven’t risen in response to the OCR announcement, but they have held steady which suggests that while businesses are feeling more optimistic, they're not quite ready to commit to growth just yet.

"The optimism starting to come through will be tempered somewhat by concerns about consumer confidence and demand, which are at the top of the list for businesses in this survey, combined with growing concern about productivity and growth.

"To maintain this positive trajectory, we need local and central government to focus on creating an environment that kickstarts economic activity and allows businesses to focus on productivity, innovation and growth.

"Reducing compliance costs and cutting red tape should be top priorities. Business Canterbury has had early engagement with the new Ministry for Regulation to highlight some of the changes that businesses have told us would have an immediate impact."

Businesses continue to operate in a complex and changing environment and are looking to best understand how they can navigate that change. We would encourage any business struggling to see a pathway to growth to get in touch.

Full survey results are available on the Business Canterbury website.

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