Two surveys portray opposite picture of the economy

Employment prospects rise, business confidence gloomy

Radio New Zealand

Auckland, January 16, 2018

Workers’ optimism about their job prospects is at the highest level since the Global Financial Crisis, but businesses are gloomier about the economic outlook, according to two new surveys.

Optimism and Pessimism

The Westpac-McDermott Miller Employment Confidence Index edged higher in the December quarter to 113.9, up 0.1 points to its highest level since 2008. A reading above 100 means optimists outnumber pessimists.

But the Institute of Economic Research’s (NZIER) latest survey of business opinion shows that 11% expect economic conditions to get worse over the coming months.

The latest survey on workers’ confidence built on a run of gains seen over the past year, helped by firm economic growth in recent years and ongoing demand for workers.

Workers expected job opportunities to continue to improve over the coming year, but remained pessimistic about their chances for a pay rise.

“The number of workers who told us that they expect to receive a pay rise over the coming year has fallen for a third consecutive quarter and is languishing at the sort of lows we saw during the financial crisis,” Westpac senior economist Satish Ranchhod said.

Low income upbeat

However, households with incomes less than $30,000 a year were upbeat about their prospects for a wage increase, as they were most likely to benefit from an increase in the minimum wage, from April.

“The number of households in this income bracket reporting that they received a pay increase over the past 12 months has risen sharply since the start of last year,” Mr Ranchhod said, adding that they were the most optimistic since 2011.

Varying outlook

The Survey indicated there were variations in the outlook around the country, with confidence rising most strongly in Northland, followed by Nelson, Marlborough, Westland and Wellington.

But the outlook in Auckland had fallen back, and was also weaker in Canterbury, Taranaki, Manawatu-Whanganui, with a sharp fall in Southland, which was the most pessimistic region.

Businesses get gloomy, despite steady sales

Businesses worried

Meanwhile, the NZIER survey found businesses were concerned because of uncertainty about the new government’s policies.

Confidence had taken a hit before the election as well.

NZIER said business sentiment typically tended to fall after Labour got into power. The decline in confidence was widespread, but the retail and manufacturing sectors were most negative.

While there’s a downbeat mood, activity levels appeared to be holding up.

New orders and sales were steady for retailers, while domestic sales remained solid for manufacturers. When it came to profitability, businesses expected further falls in profits in the early part of the year.

Businesses were more cautious about investing in their companies, while hiring intentions have eased.

Labour shortage

Labour shortages remained a problem and businesses may find it more difficult to get skilled workers as immigration slows.

But given all this, NZIER expected the Reserve Bank to keep the Official Cash Rate on hold until later this year.

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