Wednesday 28th March 2018
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Business confidence increased in March on some measures, but most remain below the levels of six months ago.
The ANZ Business Outlook reported a net 20 percent of businesses were pessimistic about the year ahead, versus 19 percent in February. Confidence dropped to an eight-year low in November on political uncertainty when the new Labour government took office. More companies saw their own activity expanding, at net 22 percent compared to 20 percent in February. That measure has a stronger correlation with GDP growth, though remains below the historical average of 28.
"The economy is certainly not crawling, but it’s hardly gliding along either. This far into the race it is naturally hard to accelerate,” said ANZ Bank New Zealand chief economist Sharon Zollner. "But while sectors of the economy such as housing and construction may be tiring, record-high terms of trade and a positive outlook for incomes are providing helpful buoyancy."
The survey showed a net 6 percent of firms expect profit to rise in the year ahead, versus net 1 percent negative in February and employment intentions rose to a net 10 percent from a net 5 percent in the prior month.
Across the four sub-sectors included, all remained negative on general business conditions. Agriculture remained the most negative, with a net 61.5 percent of respondents expecting business conditions to deteriorate, while retail became notably more negative, at net -15.4 percent from net -3.7 percent the previous month. Manufacturing worsened to net -33.3 percent from -25 percent and construction dropped to net -33.4 percent from -11.6 percent.
"The ongoing cooling in the housing market seems to have hit the retail sector anew – after a brief renaissance the sector is the second-weakest after agriculture," ANZ's Zollner said. "The services and construction sectors are the most confident, which matches up with our take on where in the cycle the economy is at."
Zollner said inflation expectations and pricing intentions were little changed in the survey, with expectations at 2.1 percent from 2.07 percent and pricing intentions rising to 29.1 percent from 25.1 percent in February.
"Our composite growth indicator, which combines business and consumer confidence, continues to suggest growth around 2-3 percent y/y," Zollner said. "Cost push pressures are real and we anticipate modestly higher wage growth. But outside of construction those firms who successfully push through price increases are swimming against the tide."
Interest rates were expected to rise by a net 40.2 percent of respondents, from net 43.9 percent in February.
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