NZ business confidence snaps five-month decline as firms get less gloomy

Wednesday 30th September 2015

New Zealand businesses grew less gloomy about the economy's prospects in September, snapping five months of declining confidence, in a period when dairy prices rallied from their lows, soothing concerns about the strength of the nation's biggest export.

A net 19 percent of firms were pessimistic about the general outlook for the economy over the coming year, an improvement on the net 29 percent of pessimists in August, according to the ANZ Business Outlook survey. A net 17 percent of firms see their own activity expanding in the coming year, up from a net 12 percent, led by construction and manufacturing.

"After five successive months of declines in the headline figure - and substantial declines at that - the turnaround is welcome," ANZ Bank New Zealand economist Philip Borkin said in a note. A rebound "was apparent across the broad survey, and importantly, in key survey indicators that more closely correlate to GDP (gross domestic product) growth."

The business confidence survey comes after an ANZ-Roy Morgan consumer confidence report showed an improved sentiment among New Zealanders, ending a downward spiral as an increasingly gloomy rural sector, peak in the Canterbury rebuild, and threatening global slowdown weighed on the collective heads of the nation.

Of the 468 respondents, a net 7.2 percent expect to increase investment over the coming year, an improvement on the 0.4 percent saying they would scale back investment, and a net 3.2 percent anticipate taking on more staff over the next 12 months, largely unchanged from 2.8 percent in August.

"Hiring and investment intentions are soft, but more consistent with maintaining the status quo than shedding staff or cutting back on spending aggressively," Borkin said.

A net 37 percent of firms see unemployment coming down in the next year, down from 41 percent in August, and 15 percent see capacity utilisation increasing from 11 percent a month earlier.

Profit expectations improved, with a net 5.5 percent seeing increased returns in the coming year, compared to a net 1.5 percent picking smaller earnings, and a net 23 percent of respondents intend to raise their prices, up from 16 percent a month earlier. Inflation expectations were relatively stable at 1.69 percent.

Residential construction intentions improved to a net 29 percent expecting expansion, from 12 percent in August, while commercial work intentions grew less negative with 4 percent seeing a contraction, down from 9.4 percent a month earlier.

More firms expect export growth in the coming year at a net 18 percent, up from 11 percent, while livestock investment intentions grew less negative, with a net 24 percent expecting investment to contract, down from 39 percent in August.

BusinessDesk.co.nz

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