FMCG Leaders Forum
Outlook for retail in 2024 Kirk Hope
Chief Executive BusinessNZ www.businessnz.org.nz As the new year starts, retail businesses will be focused on a range of issues affecting the business environment. New challenges are arising, particularly in the global environment where international tensions are rising and where key trade routes the Suez and Panama canals are experiencing blockages causing increased shipping costs for importers of many FMCG products. Here at home hopes are rising for a better year for retail in 2024 than in recent years. Growth and economic indicators are moving and business confidence appears to be on the rise. After a period of dismal forecasts for the New Zealand economy, retailers are certainly wishing for a better future. Last year was perhaps the worst on record for many retailers and hospitality businesses in New Zealand. Two years ago Covid regulations had restricted business and travel and closed down entire industries. Some smaller retail, tourism and hospitality enterprises went out of business following the Covid restrictions, and recovery since 2022 has been slow. Last year showed business confidence at rock bottom, but that may be changing now. The latest NZIER survey showed business confidence in New Zealand is starting to rise, led by the retail sector. In that survey the retail sector switched from being the most negative sector in New Zealand to the most positive. What caused the change? The improvement in sentiment would have been helped by a number of factors. It has been suggested that the change in government might have helped dispel the high levels of uncertainty that businesses were experiencing and complaining of. And changes in the economic environment would have helped too – including improvements in export earnings, slightly diminishing inflation, and increased migration. New Zealand’s economy is very dependent on the performance of our main export items and recent improvements in dairy export prices will have helped the rise in business confidence overall. And inflation, while still above the Reserve Bank’s target range of 1-3%, may be starting to fall back again. Inflationary pressures cast a deep pallor over the trading environment last year. Consumers were pretty unwilling to open their wallets given ongoing price rises, while businesses experienced the further pressure of rising input costs. The BNZ-BusinessNZ Performance of Services Index – BusinessNZ’s monthly PSI survey of the services sector – showed that sector experienced little or no expansion last year. Service sector businesses overall were not making money, with businesses reporting they were badly hammered by
“Business confidence in New Zealand is starting to rise, led by the retail sector.” inflationary pressures and staff shortages. Now, however, the PSI survey shows the sector is expanding again, and there are fewer concerns about inflation or staff shortages. This may be due to recently increased migration into New Zealand. Migrant arrivals and net migration gains over the last year were the highest on record. This increase in population has no doubt helped many businesses overcome staff shortages and will now be helping New Zealand’s growth prospects overall. But while migration generally might be up, tourism numbers are yet to rise significantly. The average monthly number of international visitors to New Zealand before Covid was over half a million. During Covid, that number fell to zero – now it’s rising again, but is still less than half that. Retail, and particularly retailers operating in the fast-moving consumer goods sector will be hoping for a pickup in tourism from overseas. The return of cruise ships for the summer season has provided a welcome boost and could be a harbinger for greater tourist numbers in future. Retail loves high turnover, and recent changes in the trading end economic environment will hopefully prompt more. Here’s to a better year in 2024 for retail and all business!
FMCG BUSINESS - LEADERS FORUM 2024
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