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NZIER’s QSBO shows business confidence improving as demand lifts

The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows business confidence has improved, reflecting a pick-up in demand over the September quarter.

A net one percent of businesses reported an increase in own trading activity – a turnaround from the net 37 percent reporting a decline in the previous quarter. This result supports expectations of a V-shaped recovery in economic activity, as the New Zealand economy responds to the unprecedented amount of stimulus measures implemented by the Government and Reserve Bank.

Nonetheless, businesses on the whole are still feeling downbeat, but this pessimism is reducing with a net 39 percent of businesses expecting a deterioration in general economic conditions over the coming months – lower than the 58 percent in the previous quarter.

Firms were surveyed over an extended period from 17 September to 13 October 2020. This means the latest QSBO captures the effects of the discovery of new community cases in Auckland on 11 August which saw the region move back up to Alert Level 3 while the rest of the country moved to Alert Level 2. The survey period over this quarter was extended given the disruptions, particularly with the enforcement of another lockdown in Auckland.

Firms more positive about hiring and investment

As demand picks up, firms are feeling more positive about expanding. This is particularly the case when it comes to hiring, with a net 16 percent of firms looking to increase headcount in the next quarter. This recovery in employment demand has seen skilled labour shortages re-emerge, with a net 18 percent of businesses reporting difficulty in finding skilled labour.

Although firms are still cautious about investment with a net ten percent of businesses planning to cut back on investment in buildings, this caution is ebbing. Uncertainty over the general election and how the COVID-19 outbreak will evolve is likely driving this caution. The decisive outcome of the general election should remove one aspect of uncertainty, which should drive a continued improvement in investment intentions.