Small firms' confidence in the business environment fell in March, following a strong rebound in the previous quarter.
However, they remain more optimistic about their own prospects and their intentions to hire and invest, and measures of small business activity were still above historical averages in all sectors except agriculture.
A net 20% of small business owners say they expect to do more business over the coming year.
ANZ retail and business banking and wealth managing director John Body said the key indicators for growth looked good for the small business sector and the wider economy, particularly given small firms made up more than 90% of New Zealand business and employed nearly a third of the workforce.
Agriculture was understandably less upbeat, in the face of challenges in the dairy industry. But it was encouraging to see strength in other sectors and signs firms were benefiting from being part of a more diversified economy, he said.
Otago Chamber of Commerce chief executive Dougal McGowan said the good news for the Otago region was comparative data from similar studies of smaller regional hubs showed regional businesses were feeling more positive about activity, employment, future work and contract streams.
‘‘Data from residential and commercial construction strongly stand out as growth areas. However, they have concerns around labour and skills shortages.
‘‘Smaller regions are definitely signalling they are bracing for a tightening of spending in the rural community, with the agriculture sector being the only sector to enter into negative sentiment. This now sits at historical lows.''
There was concern the negative sentiment continued its trend towards more negative territory on a macro scale, which has been occurring since 2014.
There were also signals small business was becoming increasingly concerned with regulations such as Health and Safety and the Employment Amendments Bill changes and how it affected them and their employees, Mr McGowan said.
The ANZ survey showed headline business confidence across the small business community fell to one point down 13 points from December. Within the small business sector, confidence for intermediate businesses. those employing six to 20 employees, and micro firms employing up to five people, both fell to one point.
Employment prospects were healthy. Small business hiring intentions remained steady at 10 points. Hiring intentions rose between six and eight points in the manufacturing, construction and retail sectors.
Services hiring intentions fell one point but still had the highest net balance at 17. Intentions returned to negative territory for the agricultural sector at -15, highlighting the focus on stripping costs out of the sector.
Investment intentions fell five points to two in the March quarter. Investment in agriculture posted a seventh consecutive negative result at -28% as the squeeze continued on cash flow. Construction (-10) and manufacturing (-1) were also well below historical norms.
More upbeat nuances were apparent in the retail sector (steady at 11) and services (down one point to 17).
Profit expectations across the small business sector were down overall but signs were generally healthy outside agriculture. Small firms saw low turnover (19%), regulation (18%), lack of skilled employment (15%) and competition (12%) as the biggest problems facing their business, the survey found.
Mr Body said those four were a common team, accounting for close to two-thirds of the problems facing the small business sector.‘‘Subdued profit expectations, particularly in agriculture, are weighing heavily on businesses.
''Businesses with more than 20 employees perceived slightly different problems with the focus more on competition (25%) and finding the right skills to do the job (25%), he said.
Wellington topped the list with a net positive score of 16 due to nationwide highs in the activity outlook, employment intentions and profit expectations.
Wellington was closely followed by Auckland on 15 and South Island regions outside Canterbury with 14. Canterbury optimism fell for the seventh consecutive quarter to one, its lowest level since the September 2009 quarter.
