Thursday 30th August 2018
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New Zealand business confidence dropped further in August as headline confidence weakened while firms' views of their own prospects stabilised.
A net 50 percent of 369 firms surveyed in the ANZ business outlook survey for August expect general business conditions to deteriorate in the coming 12 months, 5 points lower than July's result which was itself a 10-year low. The kiwi dollar dropped to 66.77 US cents form 67.05 cents immediately before the release.
Firms’ views of their own activity, which is more strongly correlated with economic growth, was unchanged with a net 3.8 percent of firms predicting increased activity in their own business. That's still the lowest since May 2009, and "well below" the long-run average of net positive 27 percent, ANZ said.
A net 5 percent of firms said they expect to reduce investment in the year ahead, down 6 points and flipping to negative, which ANZ said was rare.
"If this weakness is sustained, it will not bode well for GDP growth heading into the end of the year," ANZ said.
The survey has become a political football since last year's election as confidence has continued to weaken. On Tuesday, Prime Minister Jacinda Ardern said the figure had become "a flashing great neon sign with giant lights and fireworks going off behind it" and announced a new business working group headed by Air New Zealand chief executive Christopher Luxon. She put it down to the lack of certainty firms are feeling.
ANZ Bank New Zealand chief economist Sharon Zollner said while the survey results were mixed, there are "still many positives in the economic picture" and the bank isn't forecasting a painful slowdown.
"The fundamentals remain in place for ongoing growth, albeit at a more modest pace – provided we don’t talk ourselves out of it," Zollner said. Still, she noted that activity sub-indicators remained weak and there was a real threat from weak investment and employment intentions to near-term activity.
Today's survey showed hiring intentions dropped 8 points to net 6 percent of firms planning to decrease their staff numbers. Hiring intentions were negative across all sectors - retail, construction, agriculture and services. "This suggests weaker employment growth over coming months, consistent with stability rather than improvement in the labour market," ANZ said.
Profit expectations were unchanged at net negative 17 percent, and a net 27 percent of firms intend to raise prices, down from 29 percent in July. A net 36 percent of businesses expect it to be harder to get credit, up 1 point, and inflation expectations were unchanged at 2.2 percent.
ANZ also noted commercial construction intentions recovered 13 points to a net negative 4 percent, having hit an eight-year low in the previous survey, while residential construction intentions dropped 3 points to positive 13 percent.
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