Business Confidence Under Pressure

The PVW Partners’ March 2023 quarterly Business Confidence Survey results reflects business owners and managers in Townsville are struggling to maintain the same levels of confidence that have been felt over the past couple of years.

The March 2023 quarter resulted in an index of 2.6, a 0.8 point drop from the previous quarter and represents the 3^rd consecutive quarter of softening levels of confidence from the recent peak in June 2022.

Carl Valentine, PVW Partners Managing Partner said, “while its of some concern the level of business confidence continues to wane, the result does remain in positive territory and many elements of the index remain strong”.

Commencing in September 1991, PVW Partners Townsville Business Confidence Survey has now been running for over 30 years and is a unique measure of the levels of confidence of Townsville’s business community.

Carl Valentine observed “the survey was completed at the end of 2022 which was a year of opportunity but also increasing levels of challenges for businesses in Townsville. Our business owners and managers likely finished 2022 with a strong sense of achievement but may have been reflecting over the year end break that 2023 would potentially be a harder year in which to maintain business performance”.

“The last couple of years have seen relatively high levels of planned capital expenditure, however the March 2023 quarter result suggests a reduction in planned capital expenditure. This may signal business owners feel they’ve sufficiently invested in their business infrastructure to meet current levels of demand or that other resource constraints, like labour inputs, mean that business growth opportunities will be harder to realise in the near term. It could also be that the cost of additional capital assets, including financing costs, is now seen as to high relatively to the associated benefits”.

“Businesses do intend to keep investing in their people and trying to create new employment opportunities with the index components relating to employment and staff training remaining very strong”.

This survey also focussed on the rising costs of doing business, whether this be due to resource scarcity driving up prices, higher costs being passed on from suppliers, increasing wages to remain competitive in a tight labour market, higher insurance costs, higher energy costs, increasing interest rates or other inflationary pressures.

Carl Valentine said “when asked about the primary strategy businesses were adopting to deal with the rising costs of doing business, 2/3rds of the respondents indicated they were increasing their prices with a view to generating additional revenues and maintaining profit margins. However, of those respondents, about 32% were concerned that price increases alone would still not be sufficient to maintain current levels of profitability with their business costs rising faster than they could commercially increase their prices.”

“Of some concern to our region’s future economy, 21% of respondents felt that rising costs would simply result in reduced levels of profit and would adversely impact their business viability as they couldn’t adjust their pricing to match their increased costs.”

“With so many businesses looking to adapt to the inflationary environment by increasing prices, this will likely create further cost pressures for consumers and other business leading to a difficult cycle to break”.

Carl Valentine concluded that “2023 is likely to be a more challenging year for our business community than 2022 proved to be, however on balance the year ahead should still be viewed with positivity and optimism in our region”.