This is a positive sign for NZ businesses and the economy
Business credit demand has increased at its fastest pace in two years, up +6.3% year-on-year in the second quarter of 2023 – a positive sign for NZ businesses and the economy despite higher interest rates.
New data from Equifax New Zealand showed that the growth in business credit demand in the June quarter was driven mainly by asset finance (+13.2%) and business loans (+7.2%), with trade credit relatively soft (+1.1%) year-on-year.
“Towards the end of Q1 we observed some recovery in business credit demand which has flowed into the latest quarter,” said Angus Luffman (pictured above), Equifax New Zealand managing director.
“NZ businesses are getting on with business, with support from lenders. The availability and growth of business credit is a key foundation of economic growth. Business credit demand growth for Q2 was exhibited across the lender landscape, which indicates broad based demand growth.”
The increase in credit demand was led by the transport sector (+29.7%), followed by accommodation and food services (+16.2%), manufacturing (+15.4%), and agriculture, forestry, and fishing (+10.9%). Construction (+9.1%) and retail trade (+8.3%) also experienced an increase in commercial credit applications. There was a notable decline in rental, hiring, and real estate services (-3.4%).
Asset finance demand recovered in Q2, fuelled by growth in the accommodation and food services (+54.7%), transport (+53.0%), manufacturing (+40.4%), and construction (23.8%) sectors. The agriculture, forestry, and fishing sector, meanwhile, was a notable outlier, up +2.4% compared to the same period last year, Equifax reported.
“Activity in both services and asset building segments is an encouraging sign for broader cross sector activity. Businesses investing in productive assets, either as upgrades or new, indicates broader economic activity and productivity,” Luffman said.
Trade credit applications, meanwhile, continued to be relatively soft, at +1.1%.
“We expect trade credit to remain subdued as businesses tighten trading terms to cope with the cash flow squeeze as costs continue to rise,” Luffman said.
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