Confidence among small business (SME) owners is rising, with over a third now expecting revenue to rise over the next 12 months.
According to a MYOB snapshot survey conducted in June, business confidence has increased markedly since COVID-19 level 4 lockdown, with negativity now half that of March (-35 percent).
Reflecting responses from more than 400 SME owners, the results show that although business confidence remains "strongly in negative territory", just over a third (34 percent) of small businesses are expecting revenue to increase. This was despite almost two-thirds (64 percent) expecting economic conditions to worsen in the year ahead.
MYOB New Zealand country manager Ingrid Cronin-Knight said the results showed confidence is improving.
"While we need to be clear these are small improvements and the performance of the SME sector is still finely balanced, these are better numbers than the sector was expecting as we headed into level 4 lockdown. That's encouraging for the longer term," she said.
Confidence was strongest within the agribusiness sector at net -4 percent, with 48 percent of businesses surveyed expecting revenue to increase over the next 12 months. The sector also appeared to be the least financially impacted by the COVID-19 crisis, with 43 percent of business owners reporting stable revenue over the last 12 months and 17 percent reporting an increase.
Although New Zealand's global goods trade fell 2.8 percent over the June quarter, Infometrics senior economist Brad Olsen said primary food-based exports had performed well, with dairy prices experiencing a strong rebound in the latest GlobalDairyTrade auction.
"The preliminary value of dairy exports [rose] 13 percent per annum in the June quarter, with fruit exports up 11 percent and meat exports up 0.4 percent per annum," Olsen said.
Having operated as an essential service during lockdown, the sector continues to trade well globally, supporting farmers to spend within their local communities.
"The primary food industry is a key driver of New Zealand's continued economic activity and forms an important part of our economic rebound," Olsen added.
Business confidence within the manufacturing and wholesale and professional, property and finance sectors was also higher than the sector average.
Business confidence was lowest within the personal services sector (net -52 percent) followed by retail and hospitality (net -48 percent).
Three-quarters (77 percent) of retail and hospitality business owners had experienced a fall in revenue. Although half (48 percent) expect levels to remain down over the next 12 months, almost one third expect levels to increase.
The situation was similar within the personal services sector, with a higher percentage of businesses (43 percent) expecting revenue to increase.
The results also indicated that businesses able to support work-from-home arrangements expected to perform slightly better.
Across SME operators working from home, 38 percent expected revenue to increase over the next 12 months, compared to 24 percent that operated as usual.
"While it will continue to be a tough year for many SMEs, the projections of growth returning in many sectors are a heartening early sign as we navigate our recovery," Cronin-Knight added.
Business confidence by sector (June 2020)
- Agribusiness: -4 percent
- Manufacturing and wholsale: -30 percent
- Professional, property and finance: -31 percent
- Construction and trades: -34 percent
- Retail and hospitality: -48 percent
- Personal and other services: -52 percent.