26 Oct 2022

Businesses gloomier as costs, labour shortages ensure rough ride continues

3:26 pm on 26 October 2022
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While businesses are unhappy with their prospects, the retail sector is the least pessimistic. Photo: 123RF

Business pessimism has deepened as stronger than expected inflation appears to have rattled firms.

ANZ's monthly survey of business confidence showed a net 43 percent of respondents expect the broader economy will deteriorate this year, from a net 37 percent the month earlier.

Firms' view of their own prospects also dipped slightly with a net 3 percent of respondents expecting to be worse off compared with 2 percent in September.

ANZ senior economist Miles Workman said the stresses on businesses, especially cost pressures, remained intense, and responses received after the recent third quarter inflation numbers were generally more negative.

"Costs are still rising rapidly, and passing these costs on has become more difficult as customers become more price sensitive.

"Many firms have been chronically understaffed for a long period and the strain is telling. And economists are out there warning that interest rates are going to keep going higher ... until the New Zealand economy goes into recession or something close to it.

"If the global economy doesn't side-swipe us first, that is," Workman said.

Expectations for profits, investments, and exports deteriorated, while employment still remained positive pointing to a continued tight labour market.

Firms were also expecting higher costs and to raise their own prices, while they also expected to have to pay higher wages to keep or attract staff.

The retail sector was the least pessimistic, followed by construction and services.

But Workman said for all the negativity seen in the survey there was resilience in the economy.

"The New Zealand economy has a lot going for it. Debt is higher, but nowhere near the worrying levels other economies are struggling under .... Our primary export base is food, and when it comes down to it, people gotta eat.

"It's a rougher path ahead, but the country is still moving forward," he said.

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