Economic outlook brightens as interest rates start falling

Economic outlook brightens as interest rates start falling

Canterbury businesses are showing renewed optimism about the economy, according to the latest Business Canterbury survey which opened in the days following the first interest rate cut in four and a half years.

According to the survey, 53% of businesses expect a more robust Canterbury economy over the next year, up from 26% last quarter. There are also early indications that the recent drops in inflation and interest rates are positively impacting the business operating environment. For the first time, the proportion of businesses experiencing significant impacts from rising costs has decreased, dropping to 36%.

Business Canterbury Chief Executive, Leeann Watson says: “This rise in confidence is a welcome sign for the business community and our local economy. We’re seeing quite a large improvement in expectations for both the Canterbury economy and individual business performance, a big turnaround from what we saw in the results from May.”

However, the latest OCR announcement hasn’t led to increased expectations for investment and recruitment, but they have remained steady.

“These results are early indications that the recent drops in inflation and interest rates are having a positive impact on the business operating environment despite challenges remaining for businesses who have been through what has felt like an elastic band economy over the last few years. Expectations around investment and recruitment haven’t risen in response to the OCR announcement, but they have held steady which suggests that while businesses are feeling more optimistic, they’re not quite ready to commit to growth just yet.”

Productivity and growth continue to be a developing concern for businesses in the survey, with the percentage of businesses expressing concern increasing from 22% last year to 38% this August. The top issues highlighted by businesses in this survey are (in order): consumer confidence and demand, inflation and rising interest rates, and consumer confidence and demand.

“The optimism starting to come through will be tempered somewhat by concerns about consumer confidence and demand, combined with growing concern about productivity and growth.

“To maintain this positive trajectory, we need local and central government to focus on creating an environment that kickstarts economic activity and allows businesses to focus on productivity, innovation and growth. Reducing compliance costs and cutting red tape should be top priorities. Business Canterbury has had early engagement with the new Ministry for Regulation to highlight some of the changes that businesses have told us would have an immediate impact.”

Full summary of the survey results available here.

Have you got news to share? Email us your business news, story idea, or opinion piece to news@businesscanterbury.co.nz

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