Companies increasingly positive about economy
Business confidence continues to improve, with companies feeling less pessimistic at the end of 2020 than they did at the start of the Covid-19 pandemic.
The latest Quarterly Survey of Business Opinion from the New Zealand Institute of Economic Research shows business sentiment during the final three months of last year was more positive than the previous reporting periods.
A net 16 per cent of businesses expect a deterioration in general economic conditions over the coming months, which is lower than the 38 per cent in the previous quarter, and the 68 per cent feeling pessimistic in March 2020.
The December quarter’s findings are also the most positive the survey has recorded since March 2018.
When it comes to businesses’ own trading activity, one per cent reported reduced demand on a seasonally adjusted basis.
“This measure suggests a rebound in annual GDP growth to around two per cent at the end of 2020 from the lockdown lows in mid-2020,” says Christina Leung, principal economist at the institute.
The institute adds the construction sector has been the main driver in the rise in business confidence thanks to strong demand for residential, commercial and government projects.
“Building sector firms are feeling more confident about conditions ahead,” explains Leung, pictured. “They are hiring and looking to hire more over the next quarter.”
Sentiment in other sectors improved in the December quarter but businesses are generally still cautious about economic conditions ahead, according to the institute.
Despite weak profitability, increased certainty about the economic outlook is reportedly encouraging businesses to hire and invest.
About 15 per cent of firms are planning to increase headcount in the next quarter, while 10 per cent of businesses plan to invest in plant and machinery.
“These results indicate a recovery in employment and business investment over 2021,” says Leung.
“As employment demand improves, labour shortages are becoming more acute. This is particularly the case for skilled labour, with a net 43 per cent reporting difficulty in finding skilled labour – close to levels seen in early 2020.”
