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NZ business confidence arrests three-month slide, recovery looks 'patchy'

Monday 28th November 2011

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New Zealand business confidence picked up this month, arresting a three-month decline, as companies apparently shook off fears that ongoing global volatility will plunge the local economy into another slump.

The National Bank Business Outlook survey showed a net 18 percent of companies are picking an improvement in the economy over the next 12 months, up from a net 13 percent in the October survey.

Firms’ own activity outlook rose three points to a net 29 percent expecting better trading conditions in the coming year.

“Amidst a worrying global backdrop, most noticeably in Europe, this is not a bad reading to achieve,” the bank’s chief economist Cameron Bagrie said in his report.

“For now we appear fine, and a bastion of strength, in a relative sense, compared to a host of other Western nations.”

Local companies have been more pessimistic in recent months as the sovereign debt crisis in Europe deteriorates, while US policymakers struggle to rein in massive fiscal deficits, sparking fears the world may face another global downturn.

The National Bank survey showed firms have pared back their export intentions, with a net 16 percent of respondents seeing growth in foreign sales, compared to a net 21 percent a month earlier.

However, on the domestic front, there was an uptick in expected manufacturing volumes and a strong rise in livestock investment intentions.

Capacity utilisation improved in the month to a net 19 percent from a net 17 percent a month ago, and livestock investment intentions climbed to a net 26 percent of firms saying it will get better from a net 14 percent in October.

The survey was taken before the re-election of the incumbent National Party-led administration last weekend.

A net 4.3 percent of New Zealand businesses expect profits to increase over the coming 12 months, up from a net 1.6 percent in October, and investment intentions are up to a net 12 percent of respondents from a net 8.7 percent a month earlier.

Still, employment intentions are down to a net 5.9 percent from a net 9.9 percent of firms looking to take on new staff in October, and a net 18 percent of firms expecting to lift prices over the next year was barely changed from a month earlier.

Bagrie said the results are a “hodge-podge of pluses and minuses but with some relative respectability,” and the survey indicates 3.5 percent annual gross domestic product growth.

“There is growth, but it is scratchy and patchy,” he said.

Construction expectations were mixed, with residential building intentions falling to a net 19 percent of firms picking an uplift in construction, from a net 29 percent a month ago, while commercial intentions rose to a net 27 percent from a net 19 percent in October.

Firms got less pessimistic about securing funding, with a net 3.4 percent saying they expect access to credit to get worse in the coming year, compared to a net 9.8 percent of pessimists a month ago.

Companies’ one-year-ahead Inflation expectations were stable at 3.1 percent, while interest rate expectations declined, with a net 41 percent predicting a rate hike in the coming year, down from a net 57 percent in October.

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