New Zealand businesses were more optimistic about the state of the economy and their own activity in the September quarter, even as their profits were squeezed by rising costs and an inability to hike prices.
A seasonally adjusted net 26 per cent of firms surveyed in the New Zealand Institute of Economic Research’s quarterly survey of business opinion expect general business to improve, up from 19 per cent in June.
Of those surveyed 26 per cent experienced stronger trading activity in the past three months and 32 per cent see more expansion in the coming quarter, up from 22 per cent on both measures in June.
That upbeat outlook was in spite of a one per cent experiencing declining profits in the previous quarter .
Still, firms remain optimistic with a 20 per cent predicting higher profits in the coming period, up from 16 per cent in June.
“Although there was a further lift in confidence in the services sector and firms continue to report high levels of demand, profitability deteriorated over the past quarter,” NZIER said in the QSBO report. “This reflected firms’ increased difficulty in passing on rising costs, particularly in financial services.”
Principal economist Christina Leung said NZIER expects annual economic growth of 3.5 per cent in the current year, before moderating to an annual three per cent pace over the next five years. In the June quarter, she had been expecting annual growth of 3 per cent this year, slowing to 2.8 per cent thereafter.
While firms want to take on new staff, they’re still finding it hard to find workers, with a 41 per cent saying it was difficult to get skilled labour and a 14 per cent struggling to hire unskilled labour.
“Firms report increased difficulty in finding labour, and this may have limited the extent to which firms could increase headcount over the past quarter,” Leung said. “The difficulty in finding labour is particularly acute for skilled labour, with shortages at levels not seen since December 2007.”
She said the limited ability of firms to raise prices meant inflation would probably stay subdued for the rest of 2016.
Meanwhile, it has been a strong month for online retail, with total purchases up 17 per cent compared to August last year, according to BNZ and Marketview’s monthly report.
Online retail sales at local sites showed particularly impressive growth and were 20 per cent higher than August 2015.
The strong online growth is in contrast with growth in sales at physical stores, which were up only 3.5 per cent on last August.
Food/Groceries, Clothing, and Department and Variety stores were responsible for over half of the growth in online sales at domestic merchants. These categories were all up by more than 20 per cent on last August.
Online sales at local Sport and Camping Equipment and Computer stores were also up more than 20 per cent on August 2015.
Online purchases by Kiwi’s from offshore sites were up 14 per cent on August last year.
Key contributors to the increase were: Computer stores (up 21 per cent on last August); Entertainment Media (up 37 per cent); and Clothing (up 17 per cent).
