NZ business confidence slides to lowest level since September

Friday 29th May 2015

New Zealand business confidence slid to its lowest level since the general election last year as optimism about the economy waned and inflation expectations fell to a historic low.

A net 15.7 percent of respondents were optimistic about the general economy in May, down 15 points from April's reading, and its lowest level since September last year, according to the ANZ Business Outlook. Firms' own activity expectations declined to a two year low of 33 percent, but above the historic average of 27 percent.

"Business confidence and firms' signals on the employment, investment and activity front are receding," said Cameron Bagrie, chief economist at ANZ Bank New Zealand, wrote in his report. "Inflation expectations fell to a historical low. A low headline inflation rate will be playing a role, but it's notable that inflation expectations are tracking below the inflation target midpoint; that's unusual."

Yesterday, Fonterra Cooperative Group, the world's largest dairy exporter, cut this season’s forecast farm-gate milk price to the lowest level in eight years, while announcing a cautious opening farm-gate milk price forecast for the 2015/2016 season of $5.25 per kilogram of milk solids, at the upper end of commentators' expectations.

Across the sectors, agriculture turned to a pessimistic outlook for the economy, with a net 38.5 percent of respondents feeling negative about the economy.

Bagrie said it was unsurprising the combined strength of the kiwi dollar, which hurts exporters, and a drop in commodity prices, including the country's largest export dairy, weighing on confidence.

Employment intentions across surveyed firms slipped to net 17 percent from net 22 percent in April. Profit expectations slipped to net 20 percent from net 26 percent. Firms planning to invest declined to a net 18 percent from a net 22 percent.

Residential investment intentions lifted to a net 39 percent from 35 percent, but commercial construction intentions slid to a net 24 percent from a net 45 percent.

BusinessDesk.co.nz

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