Do optimism figures herald true or false dawn?
Wednesday 11 April 2012, 5:34PM
By Grant Thornton New Zealand
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While recent research both in New Zealand and globally points to rising business optimism, Grant Thornton New Zealand partner, Greg Thompson, looks at the strength of this confidence and wonders if in fact it is not just another “false dawn.”
According to the latest research from the Grant Thornton International Business Report (IBR), a quarterly survey of 3,000 businesses in 40 countries, business confidence in New Zealand rose from 36% to 45% in the last quarter compared with the last quarter of 2011 while overseas the lift was even stronger with business optimism in the G7 countries rising by 28 percentage points from -12% in Q4-2011 to 16% in Q1-2012.
“The increase in optimism in the United States – where it increased by 45 percentage points, from just 1% in Q4-2011 to 46% in Q1-2012 – is a major plus. Meanwhile, businesses in Japan (-53%) and Europe (-4%) remain pessimistic, but both have seen improvements over the last quarter.
“However, looking back at results over the past 12 months tells a more sobering story. New Zealand’s optimism figures are almost identical to this time last year, 45% compared with 44%, yet is the country better off than this time last year?
“When you look at Government and the fiscal drag of the Christchurch rebuild, you would have to say no. The much promised stimulus coming from that rebuild seems to move further away with each day. What was hoped to start in earnest in the last quarter of 2011 is now being pushed out as far as the third quarter of 2013 by some observers.
“And while experts, including most recently the International Monetary Fund, are saying that the New Zealand dollar is overvalued up to 20%, it has remained at these levels for such a long time that some are wondering if it will ever retreat to more export-friendly levels,” he said.
Thompson said that he did not want to sound overly pessimistic, more realistic when considering the macro economic factors that influence the New Zealand economy.
“These factors are different to the emotional triggers that affect confidence levels.
“While Europe and its debt problems will be on-going for some time, the economic recovery in the United States, borne out by brighter GDP and employment data, seems to have really gained momentum in the last quarter.
“There is also good news in the New Zealand figures. Access to, and the cost of, finance appears much less of a problem that it did three months ago with the cost of finance less of a concern (-12%), a shortage of capital (-2%) and a shortage of long-term finance (-12%) all showing positive signs.
“Battling with red tape remains a problem with an increase of 4% in the number of businesses citing it as an inhibiting factor.
“The other good news is on the wages front with 22% of employers expecting to give a pay rise above inflation, 51% in line with inflation and 24% no pay rise at all. The other good news is that no employer is contemplating reducing wages.
“Business behaviours currently do not reflect the likelihood of a positive improvement in the outlook for the New Zealand economy, but at least with a confidence that things will improve, business is poised to take advantage of any opportunities which may come their way,” Greg Thompson said.
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,500 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com
Data collection
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.
Data collection is managed by Grant Thornton International's core research partner - Experian. Questionnaires are translated into local languages with each participating country
having the option to ask a small number of country specific questions in addition to the core questionnaire.
Sample
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with 3,000 businesses globally conducted in January and February 2012.
The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 40 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (10 per cent) with the remaining 25 per cent spread across all sectors.
Locally, the sample tends to cover the sectors mentioned previously, with some countries being able to have local valid data for specific sectors or regions when the sample size is large enough.
Group/region Economies included in IBR
Asia-Pacific (APAC) Australia, Hong Kong, India, Japan, China (mainland), Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand, Vietnam
Association of Southeast Asian Nations (ASEAN) Malaysia, Philippines, Singapore, Thailand, Vietnam
BRIC Brazil, Russia, India, China (mainland)
European Union (EU) Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Spain, Sweden, United Kingdom
G7 Canada, France, Germany, Italy, Japan, United Kingdom, United States of America
Latin America Argentina, Brazil, Chile, Mexico, Peru
Nordic Denmark, Finland, Sweden
North America Canada, United States of America
Other Armenia, Botswana, Georgia, South Africa, Switzerland, Turkey, United Arab Emirates