Latest survey shows strong appetite for growth in Pacific businesses

The second quarterly Pacific Trade Invest (PTI) New Zealand Business Intelligence Survey for the September-December quarter of 2018 has reported strong growth and a good appetite to grow among Pacific Island businesses.

Though more than half of the firms reported a lift in activity over the December quarter and less than one in five firms reported a decline, the overall results were slightly lower than those reported in the inaugural Business Intelligence Survey (BIS) of last year’s July-September quarter.

“The BIS shows strong growth and appetites to grow across the Pacific. Readings may bounce around from quarter to quarter, but the first two quarterly reads from the BIS are firmly on the expansion and growth side of the ledger,” the report observes.

A net 11.4 per cent reported higher employment compared to last quarter, which represents a solid reading. That was down on the net 20.4 per cent reporting an increase in the September quarter.

More firms reported skill shortages as the biggest factor holding them back in the December quarter, and this may be one reason for a moderation in employment growth. Investment in plant, machinery, technology and buildings was robust with a net 21.2 percent reporting an increase.

“Strong recorded activity, solid employment and robust investment are consistent with brisk growth across the region,” the report observes.

Firms continue to experience pressures from rising input costs. A net 43.7 per cent of firms reported higher input costs in the December quarter.

Though rising cost pressures and inability to pass them on fully can be a recipe for firms to pull back on investment, the survey is not showing that. Firms are actually investing in plant, machinery, technology and buildings, and showing a strong intent to continue investing.

Listed among factors that affect the ability to grow businesses in the region are access to credit — the biggest factor holding firms back– and access to skilled staff.

“Those are factor input constraints,” the report points out. “Typically, it’s the sales (demand) line that holds firms back. Access to credit and skilled staff are supply issues. Sales, competition and capacity still feature as factors holding firms back in the Pacific, ranking third to fifth.”

With a net 58.9 per cent businesses expecting higher activity over the coming six months, the report shows that firms across the Pacific remain very upbeat about prospects over the coming six months. Expectations for activity within firms’ own businesses remain high, the report observes, with less than 10 per cent of firms expecting activity within their businesses to decline.

A net 18.7 per cent expect better times for the economy ahead. Optimists accounted for 38 per cent of responses and pessimists, 19.3 per cent.

The BIS is a partnership between PTI NZ and Bagrie Economics, a boutique research firm that specialises in independent, authoritative analysis of the New Zealand economy and economic issues. It has extensive market experience and provides regular, reliable intelligence and insight independent of any financial organisation. Results are processed by PTI NZ and Bagrie Economics.

BIS aims to help inform businesses and policy makers on economic trends by providing timely gauges of economic momentum and expectations for growth, employment and investment going forward. It is particularly relevant as an information source given New Zealand’s additional financial commitment to the Pacific region.

The survey was designed jointly by PTI NZ Trade & Investment Commissioner Michael Greenslade and well known economist Cameron Bagrie in 2018.