Friday 2nd February 2001 |
Text too small? |
Next six months, net per cent |
Business confidence performed the economic equivalent of a u-turn in the December quarter according to NZIER's Quarterly Survey of Business Opinion. A net 31% of firms surveyed expect the general business situation to improve over the next six months. This compares with a net 45% of firms who were expecting a deterioration in the September quarter survey.
The turnaround in confidence was widespread, with all the major sectors surveyed (wholesalers/retailers, manufacturers, builders and service sector firms) optimistic about activity in the next three months.
... unlike Australian counterparts
Unlike business opinion surveys conducted in New Zealand, surveys carried out in Australia have consistently reported a downturn in business confidence. National Australia Bank's business confidence index, which shows firms' perceptions of the business situation over the next 12 months, fell in the December 2000 quarter to minus 4 (in the past the index has fluctuated between 30 and minus 25). This was close to the value reported in the June 2000 quarter, which was a nine-year low.
Another business confidence survey, conducted by the Australian Chamber of Commerce and Industry (ACCI) and Westpac Banking Corporation, which surveys manufacturing firms, also reported a deterioration in business confidence in the December quarter. A comparison with New Zealand manufacturers is shown in the chart below.
Why is there a divergence in business sentiment?
The following factors are likely to be contributing to the lower business confidence in Australia:
In comparison, New Zealand manufacturers are expecting increased growth in new orders and output in the next three months.
Despite these differences between the two countries, there are some results for manufacturers that are common to the two countries:
Will NZ businesses stay confident?
A number of factors will support business activity over the next three months. Strong export growth is expected to continue, and domestic demand is expected to improve. Even the building sector - the weakest of the major sectors - expects output to remain stable.
But some dangers are looming. Slowing growth in the US may dampen export demand and an appreciating dollar will lower export returns. In view of this, demand may not recover as strongly as businesses expect. If this happens, business confidence might yet take another u-turn.
- Compiled by Lisa Yee
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