UPFRONT Negativity rules

New Zealand’s business sector is trudging into 2006 with an outlook that hasn’t registered such high degree of gloom since 1986.
The NZIER quarterly survey of business opinion for the last quarter of 2005 found the percentage of pessimists had doubled since its previous survey – up to 61 percent or 71 percent when seasonal variations are factored in. Confidence has dropped in all regions and across all industry groups – with manufacturers showing least confidence.
Intentions to increase staff numbers have also become negative for the first time in five years and despite pent-up labour demand, NZIER says it’s possible firms will stop hiring which could exacerbate the slowdown. Cost pressures have eased slightly though they remain historically high and the services sector was the only one expressing increased intentions to raise selling prices.
The survey results suggest the economy is in the process of “potentially acute slowdown” and, says the NZIER, should put the Reserve Bank off the idea of further interest rate rises.
Although business confidence has been dropping in Australia for while, we’ve now plummeted past our trans-Tasman counterparts, according to recent Grant Thornton International Business Owners’ Survey. It showed just 23 percent of the local businesses surveyed are now optimistic about their future prospects compared with 64 percent last year. More than third of Australian business owners registered optimism while the rapidly growing economies of India and China perhaps unsurprisingly demonstrated the world’s brightest outlook.
The survey which covers 6000 firms in 30 countries saw New Zealand drop below international averages of business optimism for the first time in three years. In terms of outlook for profitability it fell 10 percent below the global average (47 percent) and 41 percent behind India (78 percent).