Photo Source: Donovan Kelly
A survey of over 700 New Zealand businesses, conducted by Forsyth Barr, suggests that the economy is showing signs of recovery. The findings, which span the last quarter and reflect November’s data, point to increasing optimism, bolstered by lower interest rates and a boost in demand, though certain sectors remain under pressure.
Businesses See Signs of Recovery
The survey highlights a significant shift in sentiment: more than half of respondents now believe the economy is on the right track. Businesses report higher sales, particularly in November, and nearly half have started budgeting for a stronger year ahead.
Forsyth Barr’s senior analyst Aaron Ibbotson described the results as a promising signal that the worst of the economic slowdown may be behind.
“This is a large survey with over 700 respondents, and the optimism is broad-based. It’s coming off the back of interest rate cuts,” Ibbotson stated. However, he expressed caution, noting that similar periods of optimism earlier in the year failed to materialise into sustained growth.
Retail Surprises with Robust Recovery
One of the most surprising findings was the improvement in the retail sector, which showed a remarkable rebound in demand. Retailers reported a 19% increase in demand in November compared to a 29% decline in April. This optimism comes despite a weak earnings season in September.
“That was the biggest surprise relative to our expectations, that people who own retail businesses or are senior business people in the retail space have become so much more positive versus six or eight months ago.”
Construction and Manufacturing Lag Behind
While the retail sector demonstrated a notable turnaround, other industries are still struggling. Construction, freight, and manufacturing sectors continue to face significant headwinds.
“Construction is still in the doldrums, lthough sentiment is slightly less negative than eight months ago, it’s important to remember that the baseline was already very poor.” Ibbotson said. Freight and manufacturing also reported ongoing difficulties, reflecting broader economic pressures that remain unresolved.
Expert Perspective on Challenges Ahead
While businesses show increasing confidence, experts remain cautious, pointing to the uneven nature of New Zealand’s recovery. High mortgage rates and ongoing consumer financial strain are seen as potential obstacles to sustained economic growth.
“We’re cautious but I have to say it is very broad-based, it’s coming off the back of interest rate cuts and this is a large survey of over 700 respondents. To me, this looks like a pretty clear signal we are through the worst, but we’ve said it before, and it hasn’t turned out to be the case.” Ibbotson warned, highlighting the need for tempered expectations.
Implications for Policymakers and Businesses
The survey points to the importance of providing tailored support to sectors like construction and manufacturing, which play a crucial role in the broader economy. While the results bring cautious optimism, businesses are urged to plan carefully for the year ahead, given the uncertainties that still exist.
A Turning Point with Caveats
The latest survey from Forsyth Barr signals cautious optimism, with signs of a turning point for New Zealand’s economy.
Retail’s upbeat outlook offers promise, but the recovery remains uneven, underscoring the need for strategic adaptability. While businesses are poised for a stronger year, sustaining progress will require addressing persistent hurdles.