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NZ business confidence stays near eight-year low as economic tailwinds slow

Tuesday 19th December 2017

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New Zealand's business confidence continued to hover around an eight-year low in December as the tailwinds provided by an overheated housing market and record levels of migration slow down. 

A net 38 percent of businesses were pessimistic about the year ahead in the ANZ Business Outlook, versus 39 percent in the prior survey, when confidence dropped to an eight-year low on political uncertainty when the new Labour government took office.  However, a net 16 percent of companies see their own activity expanding in the December survey, compared to 6.5 percent in November. The historical average is 28. 

"The economy is doing the hard yards at the moment. Positive forces remain, but the turn in housing, flattening off in net migration and lack of capacity in the construction sector are all dampening near-term growth," said ANZ Bank New Zealand chief economist Sharon Zollner.

While she said the new government has "no doubt caused a degree of apprehension amongst businesses," she noted one headwind that does appear to be easing is difficulty of getting credit. A net 25 percent of businesses expect it to be tougher to get credit, versus 41 percent in November. 

"This may be one of the factors explaining the welcome, albeit modest bounce in the own activity measure," she said.

The survey also showed a net 3.2 percent of firms expect profit to fall in the year ahead, versus 13 percent in November. Employment intentions improved to 2.5 percent from a net negative 2.7 percent in the prior month but remain well off the July peak of 26 percent. 

Pricing intentions eased to a net 29 percent from a net 31 percent in the prior survey while inflation expectations slipped to 2.25 percent from 2.34 percent. Interest rates were expected to rise by a net 49 percent of respondents, from net 58.6 percent in November. 

Across the five sub-sectors, agriculture remained the least positive, though all were firmly negative about general business conditions.

The survey follows yesterday's ANZ Roy Morgan consumer confidence index, which showed a dip in December, with both current and future conditions easing slightly. Zollner said composite growth indicator, which combines business and consumer confidence, suggests growth of around 2 percent-to-3 percent.

Earlier today, the Westpac McDermott Miller consumer confidence index showed consumer confidence under pressure as households fret about the general economic environment and their personal financial situation.

The index fell 5 points to 107.4 in the December quarter, below the long-run average of 111.4. A reading above 100 indicates optimists outnumber pessimists, and the survey has been above that level since March 2011. The present conditions index fell 4.5 points to 107.7 while the expected conditions index dropped 5.4 points to 107.2.


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