Economy slowing says BusinessNZ

Kirk Hope writes:

Business can only react to what’s in front of it. If the perception is that the seas are calm, confidence reflects that.  If the perception is of a few waves ahead, confidence suffers.  

Right now, business is looking ahead and seeing looming waves.

A list of costs is coming down the pipeline that business will have to figure out how to afford. 

The obvious ones include increases to the minimum wage and the pressure that then puts on wages at higher skill levels, plus a long line of wage claims with industrial action firmly attached. 

Every initiative adds costs and removes jobs at one level or another.  And unless productivity increases, business won’t be able to absorb those costs. 

Add to that a significant legislative agenda – some 120 reviews announced so far plus a number of policies with the potential to impact on growth and therefore on business. 

Basically business has no idea what the Government is going to do. This is probably because the Government has no idea what it is going to do.

And there is now indisputable evidence of a downturn in impacting on actual activity. 

Lead indicators like the BNZ BusinessNZ Performance of Manufacturing Index (PMI) and the Performance of Services Index (PSI) provide some of the most up-to-date pictures of business activity across the country. 

Both surveys show lower levels of expansion that have not been seen in some time. 

Out just this week, the latest PMI shows New Zealand’s manufacturing expansion continuing its downward trend. It has revealed the third consecutive month where expansion has weakened as well as a second consecutive monthly reading below the series’ long-term average.

More concerningly, given that the Index is based on actual activity, it is hinting at further than just a slowdown in the manufacturing sector. If that continues, the economy will start contracting.

Remember all those years of Labour claiming there was a manufacturing crisis. Well they may finally be right!

The unadjusted PMI has dipped below 50 – 49.5. Seasonally adjusted it is at 51.2. This is the lowest (except last December) since December 2012.

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