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Business Confidence on the Rise

26 June 2006

Media Release

Business Confidence on the Rise

Business confidence is starting to trend back upwards in a survey of over 800 business respondents undertaken electronically by the Auckland Chamber of Commerce earlier this week.

Key messages from the survey that asked businesses to look ahead at conditions for the next six months show that business confidence has improved for the third quarter in a row, despite renewed uncertainty that interest rates will start coming down in the period ahead.

Commenting, Chamber Chief Executive Michael Barnett notes that the sharp fall in confidence that began in the Chamber’s March 2005 survey has been replaced by an upward trend, with more businesses predicting an improving environment for doing business and proportionately more believing their own prospects will improve.

“This is good news and contrasts sharply with the negative talk that is persisting in certain quarters. The evidence shows that an increasing number of businesses have decided to ‘put negativity to one side’ and are taking their own decisions to move forward.”

At the end of the day, the strong self belief of many businesses is apparent. “The survey findings show that 40% of businesses are picking the business environment to get worse in the next six months, compared with 49% who held this view at the previous survey in March 06 and the low point of 59% in the survey last December.”

Main survey findings were:

On Confidence

- 40% of firms believe conditions for business will get worse over the next six months, compared with 49% in the March 06 survey and 59% in December.

- Reinforcing the evidence of an improving trend, 12% now believe conditions will improve, compared with 8% in March 06 and just 7% in the December survey.

- 41% of firms believe conditions for their own individual business will improve over the next six months, compared to 40% in March 06 and 35% in the December survey. Similarly, 18% believe their situation will get worse, down from 21% and 25% in the previous two surveys.

On Skills

- 37% of firms believe it will continue to be harder to employ the right people with the right skills, compared to 42% last December and 54% a year ago.

On Interest Rates

- 44% of respondents now believe interest rates will rise, compared with 33% in March but 85% and 67% in the December and September surveys respectively.

- 10% of respondents believe interest rates will decrease in the next 12 months, compared to the 24% of this view in March and just 3% who held this view last December, and 5% in September.

Mr Barnett notes that the critical value of this survey compared to many others is that it is ‘here and now.’ The survey measures the opinion of more than 800 businesses “last week – Monday to Wednesday - not last month or six weeks ago.”

The result showing a rising level of optimism suggests that earlier talk of the economy dipping towards a recession or a hard landing was premature. Coupled with the news late last week showing annual GDP holding at above 2% suggests that business can be confident about the future and keep the upward trend going in the period ahead, said Mr Barnett.


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