NZ business confidence rises in May, construction sector upbeat

Tuesday 31st May 2016

New Zealand firms grew more confident about the state of the local economy for the third month in a row, with gains most evident in construction, ANZ Bank New Zealand says.

A net 11 percent of firms surveyed in the ANZ Business Outlook in May were upbeat about the economy's prospects for the year ahead, up from 6 percent in April, with a net 30 percent positive about their own prospects over the next year, compared with 32 percent a month earlier.

Construction remained the most optimistic sector at net 29 percent positive for the year ahead, with residential investment intentions unchanged at a net 36 percent while commercial construction intentions rose to net 29 percent from net 24 percent.

“The economic trail remains well groomed - migration is strong, house prices are booming, the construction and tourism sectors are slaloming incredibly well," chief economist Cameron Bagrie said in his note. “Financial conditions are still supportive despite the still-high New Zealand dollar causing some slushiness. There are few sectors we can point to as being on the rocks.

"New Zealand is in the enviable position of having credibility, competency, and stability in the government arena. It’s something we can take for granted, and is a missing base in many countries around the globe."

Business confidence dipped into negative territory last year as milk prices slumped and weighed on the dairy sector's outlook, but has been recovering lost ground in recent months.

Today's ANZ report showed sentiment in the agriculture sector was still the most pessimistic, though it had improved with a net 19 percent predicting the economy will deteriorate over the coming year compared to 27 percent in April. Expectations for their own activity were unchanged at 6 percent predicting an improvement. A net 7 percent intended to pull back on livestock investment, an improvement from 16 percent in March, and a net 7.6 percent anticipated reduced profits in the coming year, the only sector to predict weaker earnings.

Across all sectors, a net 20 percent of firms see bigger profits in the coming year, up from 16 percent in April, while 21 percent see an increase in exports. Some 22 percent of firms intend to raise their prices, though that was higher in the construction sector with net 30 percent of companies set to increase prices compared to agriculture at net 9 percent.

Fewer businesses see interest rates coming down, at a net 29 percent from 35 percent in April. Inflation expectations fell to 1.39 percent from 1.42 percent in April.

BusinessDesk.co.nz

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