New report shows plunging business confidence amid geopolitical pressures
Some employers in New Zealand are taking the headcount reduction route as business confidence plunges amid the ongoing crisis in the Middle East, according to the latest survey from the New Zealand Institute of Economic Research (NZIER).
The NZIER's Quarterly Survey of Business Opinion revealed that 9% of companies in the country reduced staff numbers in the March quarter.
Another 5% said they are also planning to carry out this reduction in the next quarter, according to the report.
The poll, which involved thousands of New Zealand employers, was carried out shortly after the crisis in the Middle East erupted, driving a surge in fuel prices and ship restrictions through the Strait of Hormuz.
Business confidence drops
The crisis has driven business confidence to the ground. According to the report, only a net one per cent of firms expect better general economic conditions over the coming months.
This is a significant decline from the net 39% expecting a better general economic outlook in the December quarter, according to the report.
By sector, a net 28% of the building sector firms are expecting a deterioration in the general economic outlook over the coming months.
This is also the case among New Zealand's architects, who are expecting a reduced pipeline in both government and commercial construction work for this year and the next 12 to 24 months.
On the other hand, the manufacturing and retail sectors remained upbeat despite the pressures stemming from the foreign conflicts.
"This optimism appears to have been supported in particular by stronger export demand in the March quarter, despite manufacturers reporting an easing in both cost and pricing pressures over the quarter, manufacturing sector profitability deteriorated," the report read.
Investment cuts among firms
Meanwhile, another 12% of the report's respondents also indicated that they plan to cut back on their building investments over the coming year, while another nine per cent plan to reduce investment in plant and machinery.
"The recent developments with the Strait of Hormuz shipping restrictions and fuel price surge have increased caution amongst firms, as reflected in firms' hiring and investment intentions," the report read.
"We expect the upcoming General Elections in November to add another layer of uncertainty."
