A record wave of business activity is set to sweep across the nation in 2014, driven by a swell of optimism from the South Island, according to ANZ’s quarterly Business Micro Scope survey of small firms. Retailing, agriculture and manufacturing are leading a lift in optimism which has seen firms’ expectations of their own activity, hiring and profitability for the coming year soar to new highs.
Fred Ohlsson, ANZ’s Managing Director, Retail and Business Banking, said:
“Rising confidence is sweeping across New Zealand, further boosting the outlook for businesses and the economy in 2014. Construction and agriculture are caught in the tail wind of the Canterbury rebuild and increasing commodity prices. But optimism is at or near historic highs across all major sectors, paving the way for a broad-based uplift in business activity, employment and economic growth.
“These factors have come together to create a sweet spot for the South Island, with optimism in Canterbury spilling over to the rest of the island whose record-high optimism now tops that of Canterbury itself. Though not quite at these levels, business confidence in Auckland also enters the New Year at a new high which bodes well for the role of our largest city in the upturn.
It is significant that optimism is at or near record high in all sectors – not just construction on the back of the Canterbury rebuild.
Highlights from the Dec 2013 ANZ Business Micro Scope survey of small firms:
[Net percentages reflect the balance of sentiment – i.e. positive minus negative responses]
• Confidence is at its highest since comparable data was first collected in 1999, with record numbers of firms expecting to up activity, hiring and profitability in 2014.
• A net +45% of firms expect to lift business activity in the coming year, double the long-term average. A net +17% plan to take on more staff and +29% expect profits to rise.
• Confidence in Canterbury (up from +21% to +27%) is spilling into the Rest of the South Island (up from +21% to +30%) which now leads the nation. Auckland firms continue to gain confidence, reaching a new high for the region of +24%.
• Services is the most upbeat sector, at +25%. Retailing recorded the largest lift in confidence (from +14% to +22%), followed by Agriculture and Manufacturing. Agriculture was the top sector for profit expectations for the first time in two years.
“These findings mirror what we’re hearing from customers: they see the approaching growth wave and are gearing up to ride it in a way that positions them better for future economic cycles. For a nation of small businesses, this spells good news for employment and the ongoing strength of our economy.”
Confidence is vital for business investment – it’s what encourages them to take risks, including the risk of employing more people and increasing pay rates.
It also tends to be infectious – businesses which see confidence increasing in other businesses are more likely to feel more confident about, and see new opportunities for, their own.