Businesses most concerned about weakening demand for goods and services

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Businesses have become far less negative about the economic outlook, though weakening demand for goods and services has emerged as a top concern.

Forsyth Barr’s third Pulse of NZ business survey conducted mid-April received feedback from about 550 business owners, directors, managers, employees and contractors from businesses of all sizes, representing a wide range of industry sectors.

The report said the economic outlook had moved “from an extremely negative position to a largely neutral one”.

Forsyth Barr director Aaron Ibbotson said the change of government had made the difference.

“There has been an enormous shift from our prior survey … and something that is not picked up in some of the commercial banks’ surveys.”

However, he said weak demand was a concern, with one in four respondents citing it as their biggest challenge.

“Weak current demand is the number one issue facing businesses today, which it was not when we did the survey, you know, seven, eight months ago and certainly not 18 months ago.

“But I would argue that businesses are still relatively optimistic and surprisingly so versus my expectations or our expectations for their businesses over the next 12 months or so.

“And it’s particularly so within the sectors that are less exposed to the cyclicality of the economy. So if you look at aged care and utilities and areas like that.”

The report indicated the biggest improvement in forward expectations, by some margin, was in aged care, with a net 50 percent of sector-related respondents expecting an improvement in profitability over the next 12 months, which was the highest of any sector.

The report also noted a widening spread between more cyclical business such as freight, construction and manufacturing, all of which were experiencing weak and weakening demand versus.

Labour availability, which was the biggest challenge 18 months ago, had dropped down the list of challenges, along with cost inflation, though inflation concerns were declining at a slower pace.

Retail also saw a substantial improvement in the forward outlook, which had turned neutral from negative.