Gareth Kiernan: Infometrics Chief Forecaster on the number of businesses reporting losses

A growing number of businesses are reporting losses and economists have voiced concerns.

IRD data shows that in the 2023 tax year, 107,360 companies out of 475,010 reported a current loss.

Another 40,670 were carrying a loss over from a previous tax year.

Infometrics Chief Forecaster Gareth Kiernan says these figures are consistent with the current deterioration of the economy.

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Episode Transcript

Speaker 1 (00:00):
Now economists are a little bit worried about the number
of businesses posting a loss. IID data from the twenty
twenty three tax years showed one in five businesses made
a loss. That's one hundred and seven businesses, one hundred
and seven thousand businesses obviously in total. Gareth Kennan is
Infametric's chief forecast Hey, Gareth, evening Heather, Now, it's a
bit of debate about these numbers. Is it one in

(00:20):
five or is it actually one in three?

Speaker 2 (00:23):
Well, there's about a third of businesses when you look
at those numbers that record it neither a profit nor
a loss zero and comes. So my feelings those ones
should probably be taken out of the numbers because it
looks like they're not operational, probably not even you know,
sort of a real business in a sense. So you
probably get a better steer just looking at the numbers excludized.

Speaker 1 (00:39):
Ones, and that takes us to what one in three?

Speaker 2 (00:42):
Yes, sense right?

Speaker 1 (00:43):
Yeah, Okay, Now tell me you understand this better than
I do. But if we have an increase in the
current loss share from thirty two point three percent to
thirty four point six percent, that doesn't seem that bad.

Speaker 2 (00:55):
No, I mean I was surprised by the sort of
lack of movement and the numbers. When you look at
the data over the last seven years, they haven't really
swung around a lot. The changes seem to be pretty marginal.
The other thing that surprised me is the fact that,
you know, you are talking a third of businesses that
are making a loss in any given year, and you
would hope that across the economy overall, that things were
a little more profitable when times were going good. But
it doesn't seem to be the way the numbers work out.

Speaker 1 (01:17):
Now, why would it be that it hasn't got given
I mean, we are talking about having a recession. Some
say is the worse than thirty years, some say the
worst than fifty years. Whatever it is, it's bag. How
come it hasn't gone up more than that?

Speaker 2 (01:29):
Look, it may just be a reflection that there's sort
of an uneven distribution across you know, companies making losses.
We don't know how big those losses are, and they
might have been quite previous years and there might be
more loss making going on. So you know, it's a
case of I guess having to look at some of
the other indicators around how businesses are performing out there
as well, and just trying to get a steer on them.
But you know, over the last two years, those numbers

(01:50):
at least suggesting there are more businesses making a loss.
So it is consistent with the deterioration and the economy
that we have seen.

Speaker 1 (01:56):
Is it possible that, because this is the twenty twenty
three to twenty four tax that actually we're not seeing
the ugliest stuff yet.

Speaker 2 (02:04):
Yeah, that's right. I mean when you look at the
numbers and the way the economy performed, it was kind
of flat through twenty twenty three through that, and so
that's still been captured in the twenty four year, like
you say, And the worst of that recession we know,
was through the middle part of last year, so in
the twenty twenty five tax year. So it could well
be that over the next twelve months or so, as
we get more data through you do see more of
a deterioration and those figures coming out.

Speaker 1 (02:26):
Yeah. Now, we have been spending a lot of time,
because everybody's feeling gloomy in the middle of winter and
feeling a bit poor, We've been spending a lot of
time just thinking about the economy. What is your forecast
for when we start to feel decent about what's going on.

Speaker 2 (02:39):
Yeah, Look, the one thing that's really holding us back
as far as I'm concerned is the labor market. You know,
we were hoping that the unemployment rate would peak in
them this year and start to track lower. We've pushed
out the timing on that, but the real concern for
me is when you look at things like job ad
numbers or monthly job figures, they've gone sideways for the
last year or so and there's not really any sign
of an improvement there. And my feeling is that until

(03:02):
you start to get that labor market turning around, until
there's an improvement in people's sense of job security and
income security around that, even though interest rates have been
coming down and people of not having to pay as
much on the mortgage, they will still be cautious on
their spending for some time. So it could well be
into late late this year or early twenty twenty six
before that household spending starts to pick up, and of

(03:23):
course at that time we should start to see more
spending coming through in provincial areas. With the good export
prices that we've had as well.

Speaker 1 (03:28):
Good stuff, Gareth, Thanks for your time. Gareth Kenan, Informetric's chief, forecasted.

Speaker 2 (03:33):
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