2 May 2024

Retailers, manufacturers and other businesses struggling amid economic downturn

10:54 am on 2 May 2024
No caption

The entire retail sector had been hit by the downturn in the economy, even non-discretionary sectors. Photo: 123rf

Many retailers, manufacturers and employers are struggling to keep going amid a downturn in the economy and falling consumer and business confidence.

Sentiment was not helped by the Reserve Bank's latest half-yearly financial stability report warning that new or persistent inflation pressures could mean global interest rates stay higher for longer.

Employers and Manufacturers head of advocacy Alan McDonald said high interest rates were the biggest drag on industries' outlook along with persistent domestic inflation.

"What we're seeing in New Zealanders is non tradable inflation -- the stuff that's influenced by the behaviour here that's staying relatively high - it's still near 6 percent," he said.

"And that's the bit that's hurting I think, in terms of local initiatives in particular, it's just sapping the confidence I think to invest or spend a bit of money on the business."

McDonald said some economic indicators were heading in the right direction, but progress was slow, compared with other parts of the world.

Retail NZ chief executive Carolyn Young said the entire retail sector had been hit by the downturn in the economy - even sectors which were non-discretionary - such as grocery and petrol.

"We obviously have an economy that's in a difficult spot right now. And while consumer confidence is really low, we're not going to see that turnaround in a hurry," she said.

Annual unemployment was sitting at 4.3 percent and forecast to rise above 5 percent by the end of the year, while the central bank's official cash rate was expected to remain at 5.5 percent for the rest of this year - at least.