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Auckland’s Economy Coming Off The Boil – And Fast!

Auckland’s Economy Coming Off The Boil – And Fast!

Auckland businesses are predicting a sharp downturn in the economy over the next six months, and signalling an early end to the Indian summer they said in December would last into the middle of this year.

Eighty-four per cent (84%) of Auckland businesses surveyed this week now expect the economy to deteriorate or remain the same during the next six months.

This outcome compares sharply to the 82% of businesses surveyed last December who expected the economy to improve or remain the same during the next six months.

Reinforcing the reversal from high levels of optimism into a mood of pessimism in the last four months, 36% of respondents believe the general business situation will get worse over the next six months, compared to just 17% in December’s survey.

Also reinforcing the increased pessimism around Auckland is a finding that 47% of respondents believe that their own business' situation will deteriorate or stay the same in the next six months, compared to 35% in a similar survey a year ago.

These are among the main findings of a regular survey of Chamber of Commerce members on how they view business prospects in the period ahead.

The survey was conducted by internet over the last three days. Of 550 responses analysed, 88% indicated that they employ 100 or less people.

Commenting, Chamber of Commerce Chief Executive Michael Barnett said it is very obvious that Auckland’s economic fizz “has gone flat.”

“Among the drivers are clearly the international situation, America’s Cup loss and the encroaching negative impact on Auckland of lower commodity prices for exports and the higher dollar.”

“This is a ‘here-and-now’ survey of what nearly 550 Auckland businesses said in the last few days,” said Mr Barnett.

When this survey is lined up against other New Zealand-wide surveys revealing gradually increasing pessimism since October last year, it is as if Auckland is catching up with the rest of New Zealand – “our economic Indian summer has ended.”

Clearly, the survey findings are not good news, even if predictable, he said.

In particular, continuing to be a huge worry is that businesses say it remains difficult to find suitable staff. While 35% of businesses say that it is harder to find skilled staff compared to 44% last December, as in previous surveys more than 70% overall are reporting that sourcing suitable staff is the same or more difficult while only a small number – 7% - say it is getting easier to locate suitable staff.

In other key findings:

On interest rate trends over the next 12 months, expectations of lower interest rates are on the rise. Just 21% of respondents now believe interest rates will increase compared to 30% in December and 44% in September.

Forty-five percent (45%) of those surveyed predict interest rates will remain the same over the next 12 months, compared to 55% in December. Twenty-nine per cent (29%) now believe interest rates will decrease compared to 9% in the December survey and 8% in September.

Both finance and demand continue to be the most limiting factors to businesses expanding their activity. Twenty-six percent (26%) of respondents indicated that demand was the single factor most limiting their ability to expand, up from 22% in the December survey. As in previous surveys, finance was the next highest constraint (25%) followed by capacity (17%).

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