Small firms’ business confidence hit a new post-2008 low in the September 2019 quarter, with a net 50 per cent of small businesses pessimistic about general business conditions in the year ahead – down from 36 per cent in June – according to the latest ANZ Business Micro Scope survey.
The composite growth measure for small firms – which takes into account firms’ views on growth indicators including activity, hiring, profit and lagged investment intentions, and is a proxy for GDP growth – fell across all indicators.
The composite fell sharply in September to -4.4, heavily weighed down by declining employment intentions. Investment intentions was the only indicator to avoid setting a new post-Global Financial Crisis (GFC) low. Despite this, investment intentions still fell to the fourth lowest recording since 2000.
“Pessimism continues to dominate small business confidence this quarter,” said ANZ acting managing director retail and business banking Benjamin Kelleher.
“A net 50 per cent of small businesses are pessimistic about general business conditions, which is the lowest level of small firm confidence we have seen since 2008, and the composite growth measure indicates widespread growth concerns.
“Warning signs for economic growth are signalled by a large fall in hiring intentions this cycle. Employment growth and a tight labour market have been a major driver of consumer sentiment and consumption this cycle, and the fall in hiring intentions is a material risk for the economy.
“However, although business confidence is low this quarter, the economy itself remains relatively upbeat. It’s important to remember that New Zealand continues to report low unemployment figures and stable GDP growth,” Kelleher said.
Of the regions, Canterbury hit a post-GFC low with a growth measure of -12, with the rest of the South Island more upbeat with employment, activity, and investment contributing positively. Wellington maintained a positive stance.
Small firms’ expectations of their own activity fell below zero for the first time since June 2009, with intentions to invest in plant, buildings and equipment falling to a net negative 7 per cent of firms. Business profit expectations remained low, with no sector reporting positive profit expectations since March 2018.
Regulatory requirements remain the biggest problem facing small firms, closely followed by continued difficulty finding skilled employees.