More than one-in-five small and medium enterprises in New Zealand are feeling the effects of falling dairy prices, according to accounting software developer MYOB.
Business Monitor research commissioned by MYOB and undertaken by Colmar Brunton found that 21% of the more than 1,000 SMEs surveyed stated their business’ revenues were negatively affected by the dairy price.
The primary sector is taking the greatest hit of all the industries, with 45% indicating that consumer confidence was down.
This adverse effect was reflected in revenue returns for the sector also as 43% reported a downturn as a result of the dairy price, with more than half of those saying this effect was very negative.
The manufacturing and the wholesale sector was the next most affected. 36% of SMEs in this sector saw their revenue returns decline due to the dairy downturn, and a third (33%) felt it negatively impacted on their consumer confidence.
The price of milk solids has also made a direct hit on the revenues of the retail and hospitality (24%) and logistics (23%) industries in New Zealand. Notably, a third of retail and hospitality businesses felt dairy prices had affected consumer spending.
“During the six years that the Business Monitor has been running, we have found the retail and hospitality sector to be the bellwether of the New Zealand economy. If consumer confidence is down in this sector it is highly likely we will begin to see spending decline across the whole country,” says MYOB general manager James Scollay.
More concerning is the 25% of SMEs said its directly hitting general consumer confidence.
It means that approximately 100,000 businesses employing upwards of one million New Zealanders are facing reducing revenue because of the dairy downturn.
Scollay says that the results show a significant impact on the New Zealand economy.
“It stands to reason that the rural sector would have taken a hit, but what we are seeing is that the effects of the dairy downturn are filtering through to the cities and other industries, slowing consumer spending and beginning to hit the bottom line of many SMEs,” says Scollay.
Wellington and Auckland appear insulated from the effects on revenue, but the most affected of all the main centres was Christchurch.
When asked, “To what extent has the dairy price affected your business regarding revenue?”, a quarter of all companies in the city reported an adverse impact on their income and 26% stated consumer confidence was down as a direct result of the dairy price.
The Capital was the least of the major cities impacted, with only ten per cent of SMEs stating their revenue returns were affected by the milk price, and 9% is seeing a reduction in consumer confidence. In Auckland, although revenue yields have not been affected too strongly (14%), 21% of businesses in New Zealand’s largest city said they saw an adverse effect on consumer confidence.
Outside of the cities, 39% of the MYOB Business Monitor’s rural respondents stated that the dairy price was hitting consumer confidence, and 34% saw that negative change in their revenue.
“It is worrying to note that 19% of rural SMEs said the impact on their income was significantly negative,” says Scilly.
