Construction-led improvement in NZ business confidence

Thursday 29th March 2012 1 Comment

The construction industry is leading business confidence higher in the latest National Bank Business Outlook survey, reflecting expectations of the Christchurch rebuild kicking into life.

However, the bank’s chief economist Cameron Bagrie warns the improving sentiment is not occurring throughout the economy, with export commodity prices still weakening and the government’s belt-tightening keeping consumers’ wallets locked away.

Nonetheless, a net 34 percent of businesses expect better times in the year ahead, up six percentage points from the February survey, and sentiment is even stronger when firms are asked what they expect for their own businesses.

A net 39 percent of the 421 firms nationwide which responded to the monthly survey say the year ahead looks better for their own enterprise, up eight points on last month to a 7-month high.

Employment, investment and profit expectations were also on the rise, although Bagrie warned there could be an element of current optimism being based on the expectation that “it surely can’t get any worse?”

“The process of balance sheet repair has further to run. Commodity prices are easing. Tighter fiscal policy will take more money out of our pockets than we get back,” he said, but there were rays of sunshine among the challenges with agricultural output up strongly after a good growing season, higher property prices and “a lot” of improvement in the global economy, at least for now.

The latest survey showed New Zealand was “moving in the right direction, but with a sting in the tail,” said Bagrie. “Improvements are being led by housing and construction. It’s growth, so we’ll take it, but with the current account deficit at 4 percent of gross domestic product and net external liability position at 72 percent of GDP, the housing market can only get us so far.”

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

On 30 March 2012 at 10:20 am Steve Holloway said:

How is it that rising property prices can be seen as "good news" when it is these very prices - ludicrously high by international standards - that contribute to the dangerously high current account defecit and debt/GDP percentage?