Asset Finance growth continues to grow; Trade Credit steady but remains below pre-COVID levels

Equifax NZ Quarterly Business Credit Demand Index: March 2022

- Overall business credit enquiries decreased by -9.2% (vs March 2021 quarter)

- Business loan enquiries decreased by -18.5% (vs March 2021 quarter)

- Trade credit enquiries decreased -0.5% (vs March 2021 quarter)

- Asset finance enquiries rose by +3.6% (vs March 2021 quarter)

Auckland, New Zealand, April DD, 2022:

Business credit demand continued to be soft, declining for the third consecutive quarter, with a 9.2% reduction in overall business credit enquiries year-on-year for the March 2022 quarter.

Whilst a number of sectors are experiencing decreases in credit demand, construction sector credit activity continues to perform well with a year-on-year increase in credit demand of 3.8% for the March 2022 quarter.

This is despite multiple constraining factors including; staff shortages, rising materials costs and supply chain restrictions.

Released today by Equifax New Zealand a global data, analytics and technology company and the leading provider of credit information and analysis in New Zealand and Australia, the Business Credit Demand Index(BCDI) measures credit enquiry volumes for commercial products including asset finance, business loans and trade credit.

Angus Luffman, Managing Director Equifax New Zealand, said: “Business credit demand has held up relatively well despite the March quarter being heavily impacted by the Omicron outbreak and continued weakness in business confidence. The upcoming quarter will tell us how well demand will bounce back post Omicron.

Business credit applications finished the March quarter with good momentum but have quickly retreated in the first few weeks of April, with the holiday period.”

Asset finance continues to perform strongly, with enquiries for the March 2022 quarter 3.6% above the March 2021 quarter; the fifth consecutive quarterly increase for this lending category. “Supported by strong commodity prices, together with heavy demand from overseas, asset finance enquiries in the Agriculture,

Forestry and Fishing sector have increased by 88% for the most recent quarter, with volumes of enquiries in this space holding ground since the second half of 2021,” says Luffman.

The Accommodation and Food Services sector remains in the doldrums. with a 15.7% reduction in credit demand for Q1 2022 although businesses see some return of customer spend activity despite the presence of the Omicron outbreak through a majority of the March quarter. “Demand activity has improved in the Retail sector. 

Whilst there was a decline of 5.7% in retail industry business lending enquiries, the March quarter was an improvement from H2 2021”, says Luffman, “Access to finance is key to enabling businesses to adapt their propositions for online distribution channels”.

“As the economy and borders open up under the Orange setting, we would expect to see changing lending needs. At the same time business proprietors will likely remain circumspect  about taking on new debt in the near term, taking time to build confidence before they up their borrowing to invest. This is particularly so for those operating in the more vulnerable sectors whose businesses have been particularly constrained through travel restrictions, consumers working from home and labour availability.'

Source: Equifax