NZ business confidence lifts in April as construction sector underpins growth

New Zealand firms were more optimistic about the economic outlook this month as a buoyant construction sector remains central to the country's growth in the coming year, ANZ Bank New Zealand says. 

A net 6.2 percent of firms surveyed in the ANZ Business Outlook in April were upbeat about the economy's prospects for the year ahead, up from 3.2 percent in March, and 32 percent anticipate their own activity to expand, compared with 29 percent a month earlier. Construction is still the most optimistic sector in terms of the wider economy and its own activity, and residential investment intentions were unchanged at 36 percent, while commercial construction intentions slipped to 24 percent from 30 percent. 

"The broader survey continues to point to solid economic momentum of around 3 percent growth," chief economist Cameron Bagrie said in his note. "Winter may be coming, but it's business as usual across the broader survey; firms continue to get on with it despite low headline confidence." 

Business confidence took a dent last year as milk prices slumped, weighing on the outlook for the country's dairy sector, and their inability to pass on rising costs kept firms pessimistic in the New Zealand Institute of Economic Research's quarterly survey, which doesn't cover the farmers. 

Today's ANZ report showed the agriculture sector was the most pessimistic with a net 27 percent predicting the economy will deteriorate over the coming year, and just 6 percent expect their own activity to improve. A net 16 percent intend to pull back on livestock investment, compared to 4.9 percent in March, and a net 18 percent anticipate reduced profits in the coming year, the only sector to predict weaker earnings. 

Across all sectors, a net 16 percent of firms see bigger profits in the coming year, up from 13 percent in March, and 22 percent see an increase in exports. 

About 35 percent of those surveyed see interest rates coming down, compared to 39 percent a month earlier, while just 0.5 percent say it's easy to get credit. Firms own pricing intentions were largely unchanged at 17 percent intending to raise them, while inflation expectations rose to 1.42 percent from 1.38 percent in March.

BusinessDesk.co.nz

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24th May 2019 Morning Report