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Small business confidence: Down, but not out

12 October 2015

Small business confidence: Down, but not out

Confidence among small firms has fallen further, consistent with a slowing economy, but firms are still growing, according to ANZ’s quarterly Business Micro Scope survey of small businesses.

The composite measure of growth in the small business sector (taking in activity, employment, investment and profit expectations) remains in positive territory, only slightly below historical averages. However, the headline business confidence figure fell to its lowest since 2009.

Optimism remains highest in Auckland and Wellington, though it is down from recent highs. Small businesses in the North Island outside those centres reported the lowest levels of optimism, likely reflecting challenging conditions in the agricultural sector.

For the first time in two years, a lack of demand (low turnover) was identified as the biggest challenge facing small firms.

Fred Ohlsson, ANZ’s Managing Director Retail & Business Banking, said: “What small business owners are saying is consistent with slowing economic growth. The economy has softened since the start of the year but is still moving forward. There is growth but firms are becoming more cautious about future trading conditions.

“This further underlines the importance for small business owners to have a robust business plan which anticipates change, provides direction and can help owners to trade successfully through fluctuations in demand and economic conditions.”

Highlights from the September 2015 ANZ Business Micro Scope survey of small firms:

[Net percentages reflect the balance of sentiment – i.e. positive minus negative responses]

Small business confidence continued to fall from recent highs. The composite measure of small business sentiment fell 11 points to +7%, and is now just below the long-term average of +11%. Headline business confidence fell to -23%, a six-year low.

Auckland (down 5 points to +14%) and Wellington (down 19 to +13%) remain the most optimistic regions, albeit significantly down from recent record highs. All regions except the Rest of the North Island (-1%) recorded net optimism.
Sentiment fell across all sectors, though all sectors remain net positive except Agriculture (down 9 points to -15%). Retail recorded a modest fall (down 3 points to +10%), while Construction (down 23 points to +2%), Services (down 11 points to +13%) and Manufacturing (down 14 points to +9%) recorded sharper falls.

Low turnover (cited by a third of firms) is the top challenge facing small businesses, followed by Regulation, Lack of skilled staff and Competition. These categories have regularly been cited as the top four challenges over the past two years.


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