ANZ BUSINESS MICRO SCOPE DOWN, BUT NOT OUT

Transcription

1 Weighted net balance DOWN, BUT NOT OUT Data for September quarter 1 The ANZ Business Micro Scope is a quarterly indicator which focuses on the prospects of small businesses across New Zealand. The survey was launched in March 12 to address a lack of on-going research specific to the small business sector. The Micro Scope covers a range of key business intentions and views on prospects for both respondents own businesses and the wider economy. The figures in this release cover the three months to September 1. The survey takes in responses from 278 small firms, comprising two tiers: the micro-sized segment (up to staff) and the intermediate segment (6 to employees). The sample is taken from the ANZ Business Outlook survey, which covers micro up to large businesses. Comparisons prior to March 12 are calculated by extracting corresponding data on small businesses from that survey, which goes back to December CONTACTS Fred Ohlsson Managing Director Retail and Business Banking Telephone: Cameron Bagrie Chief Economist Telephone: Cameron.Bagrie@anz.com SUMMARY Small business confidence fell to a six year low in the September quarter. Firms own activity expectations, employment and investment intentions all dipped, but remained in positive territory. So there is still growth, but it s at a slower rate and firms are more cautious. For the first time in two years, the lack of demand (i.e. low turnover) emerged as the biggest problem identified by small businesses. That s consistent with a slowing economy. Optimism remains highest in Auckland and Wellington. Small businesses in the North Island outside those centres reported the lowest levels of optimism. Optimism was the lowest in agriculture. Small businesses account for 9% of firms in New Zealand, and employ nearly a third of all New Zealanders. Despite the significance of small businesses to the economy, there is only a limited amount of official data reported on economic prospects in the small business sphere. To fill this void we present survey information for small business, using employment as a proxy for business size. From this we have compiled a composite gauge of economic prospects in the small business sector, using weighted variables for expectations of activity, employment, investment, and profitability. Headline business sentiment across the small business community fell to -23, the lowest since March 9. Our composite measures, which combine activity, employment, investment and profit expectations and are a broader measure of prospects, fell to a six year low (see Figure 1). FIGURE 1. SMALL BUSINESS CONFIDENCE, COMPOSITE MEASURE Micro Intermediate Small The composite measures of growth nonetheless remain in positive territory for the small business sector (+7 overall, +2 for micro and +12 for intermediate sized firms) and are only slightly below historical averages (+11, +7 and +14 respectively). So we have a situation where the economy has softened considerably since the start of the year but has not stopped moving forward completely. There is still growth being achieved across the economy but firms are becoming more cautious over where to from here.

2 ANZ Business Micro Scope / October 1 / 2 of FIGURE 2. OWN ACTIVITY FIGURE 3. HIRING INTENTIONS FIGURE 4. INVESTMENT FIGURE. PROFITABILITY FIGURE 6. BIGGEST PROBLEM FACED, BY FIRM SIZE Low turnover Regulation Lack of skilled empl Competition Cashflow Tax burden Rents/Rates Other Internal Mngnt Ease of Credit Pay Rates Exchange rate Inflation Interest rates Supply Shortage When firms were asked to assess their own business activity over the next 12 months, the net balance (i.e., the proportion expecting an increase less the proportion saying decrease) for small businesses fell 17 points to +12, still in positive territory, but the lowest level since June 9. Expectations across the small business sector are now below historical norms (+22). Within the small business segment, own activity expectations fell 1 points to + for micro sized firms, whereas for intermediate sized firms it fell points to +18. Both micro and intermediate sized businesses general assessment of the wider economy were the weakest since June 9. Hiring intentions within the small business community fell 11 points over the quarter (+2). Hiring intentions across micro sized businesses slipped 1 points to a six year low (-6), and intentions for the intermediate sub-group fell 13 points (+9). Micro sized business hiring intentions turned negative for the first time in over two years. A net +33 percent of small businesses now expect the nationwide unemployment rate to rise in a year s time, reflecting a fall in optimism in firms outlook for their own activity. Investment intentions across the small business sector fell 11 points in September, following the 7 point decline in June. At +1, investment intentions are their lowest since September 9 and are below historical averages (+1). Investment by micro sized firms fell 1 points to -3, and expectations for intermediate sized firms fell 13 points to +4. Capacity utilisation among small sized firms fell to a six-year low (+7), as capacity utilisation among micro and intermediate sized firms eased. Profitability expectations across the small business sector fell to a six-year low, down 16 points to -3. Expectations across micro sized firms sank 1 points to a net balance of -9. A net +3% of Intermediate sized firms still expect profitability to lift although this is down from a net + in June. A net 17% of all small businesses expect prices to increase over the next 12 months, down from a net 22% expecting an increase three months earlier. The proportion of small businesses expecting interest rates to fall increased again this quarter, up from a net +24 in June to a net + in September. Insufficient demand emerged as the biggest problem facing small business in New Zealand. A record one third of all small businesses identified low turnover as the biggest problem that they faced, up from 1% in June. Regulation and lack of skilled employees were the next largest problems identified by small businesses, with competition the fourth most identified problem faced by small businesses. All four of the above categories have regularly been placed in the top four problems over the past 2 years. At the other end of the spectrum, the exchange rate joined inflation, interest rates, and supply shortages, as being amongst the least problematic issues among small businesses. % % 4% Small business Large business

3 ANZ Business Micro Scope / October 1 / 3 of FIGURE 7. SECTORAL COMPOSITE BUSINESS SENTIMENT MEASURE: SMALL FIRMS Agriculture Manufacturing Construction Retail Services -1 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-1 Jun-1 Sep-1 Our small business composite growth measures fell for all five sectors in September. The construction sector composite registered the largest fall, down 23 points to +2. The Agriculture composite declined 9 points, to -1, the lowest in its (admittedly short) history. Manufacturing and service sector composites also fell sharply, with a more modest 3 point fall for the retail sector. FIGURE 8. REGIONAL COMPOSITE BUSINESS SENTIMENT MEASURE: SMALL FIRMS Auckland Wellington Rest of Nth Is Canterbury Rest of Sth Is Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-1 Jun-1 Sep-1 There was also a geographically widespread decline in the composites in the September quarter. Sentiment among North Island small businesses outside of Wellington and Auckland fell to a six-year low (-1), no doubt reflecting pessimism among agricultural sector small businesses. Auckland small businesses have the highest level of sentiment across the regions, recording a modest point decline to +14. Sentiment among Wellington small businesses fell 21 points to +13 and small business sentiment in the South Island fell to + in September.

4 ANZ Business Micro Scope / 8 October 1 / 4 of IMPORTANT NOTICE SMALL LARGE Dec 14 Mar 1 Jun 1 Sep 1 Dec 14 Mar 1 Jun 1 Sep 1 COMPOSITE SENTIMENT Business Confidence Activity Outlook Exports Investment Capacity Utilisation Residential Construction Commercial Construction Employment Unemployment Rate Profits Interest Rates Pricing Intentions Ease of Credit Inflation Expectations AGRICULTURE MANUFACTURING CONSTRUCTION RETAIL SERVICES AUCKLAND WELLINGTON REST OF NORTH ISLAND CANTERBURY REST OF SOUTH ISLAND Business Outlook survey. The definition of business size is based on the number of employees in the following way: Small - and Large 21+. The data is net balance (% up/improve minus % down/worsen), except for inflation expectations.

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