Small firms’ business confidence remained low by historical standards during the June 2019 quarter but growth prospects are showing tentative signs of improvement in the regions, according to the latest ANZ Business Micro Scope.
Encouragement for local economies and New Zealand more broadly is stemming from improving investment intentions, said ANZ acting managing director retail and business banking Benjamin Kelleher.
“Investment intentions have continued to improve for the third consecutive quarter despite historically low hiring intentions and profit expectations. Growth measures in Canterbury, other South Island centres and Wellington are all up,” Kelleher said.
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 – improved in all regions except Auckland.
Auckland’s composite growth measure dropped 6 percentage points, falling from the top region in the first quarter to the bottom, while Canterbury increased 10 percentage points, other South Island centres were up 6 percentage points and Wellington improved on the back of recovering investment intentions.
“While these results are promising, pessimism continues to dominate small business confidence this quarter. A net 36 per cent of small businesses are pessimistic about general business conditions, which resembles the level of small firm sentiment in the years leading up to the Global Financial Crisis,” Kelleher said.
Small firms’ expectations of their own activity stabilised following two consecutive quarters of optimism, falling back slightly by 2 percentage points to +6 per cent. While activity expectations remained low, agriculture small firm expectations bucked the trend, rising 16 percentage points to +18 per cent.
“This shows there’s still work to be done despite concerns around regulation, falling dairy prices and difficulty finding skilled staff.”
Small business profit expectations remain negative but are recovering. Manufacturing firms are the most optimistic, having improved from -19 per cent in September 2018 to -0.3 per cent this quarter.