A look at the New Zealand economy and the implications for the pest control sector.
The New Zealand economy is not in great shape. Although the March quarter showed a 0.2% growth GDP, on a per capita basis it has now shown six consecutive quarters of contraction – a fairly lengthy recession. A third of businesses are expecting the economic condition to further decline in the near future (NZIER survey). Consumer confidence is similarly negative.
On the ‘good news’ front, inflation continues to fall, although it is still higher than desired, at 4%. But costs continue to increase, with a net 41.6% of businesses expecting to have to increase prices over the next three months (% expecting to increase – % expecting to decrease).
With the prolonged economic downturn, it is not surprising that unemployment continues to increase, now up to 4.3% in the March quarter. It is expected to increase to over 5% by the end of 2024. Annual wage growth was 3.6% in the year to June.
Certainly, the bigger pest control companies have increased their wages in an effort to retain staff. Despite the competition in the commercial pest control market, this means that pricing is still increasing, more often than not (which is a good thing). With pest control a necessity for most commercial businesses and they themselves having to put prices up, they are generally more understanding of increased pricing for pest control services, although for some it may not stop them shopping around.
In the domestic market, with the increased cost of living pressures, some residential customers are turning to the DIY option. An increasing number of cleaning/ building washing companies are offering spider sprays, no doubt as they are losing customers and looking to add value, which is increasing the competition in the residential pest control market.
While it can be tempting to reduce prices to counteract this competition, it should always be remembered that the reduction in price is all lost profit and that will need to be offset by an increased number of jobs to deliver the same bottom line.
