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NZ business confidence slips in February as economic growth hits 'mature stage'

Tuesday 28th February 2017

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New Zealand business confidence slipped in February while remaining relatively optimistic, as the country's pace of economic growth starts hitting a "mature stage" where it becomes harder to keep hitting new highs. 

A net 16.6 percent of firms are optimistic about the general outlook for the economy, down from 21.7 percent in December, according to the ANZ Business Outlook. A net 37.2 percent see their own activity expanding in the year ahead, down from 39.6 percent, and still north of the 28 percent long-run average. 

Record levels of tourism and population growth have helped fuel consumer spending over the past year and coincided with a major construction boom, helping drive New Zealand's economic growth and offsetting a period of tepid inflation that's kept price increases off the table, leaning on firms' profitability. 

ANZ Bank New Zealand economist Cameron Bagrie said the survey of 416 firms showed economic indicators were still "well above average" and indicated more of a levelling out in the pace of growth rather than signalling a downturn. 

"The economy is moving further into a mature stage of the economic expansion," Bagrie said. "When things already look pretty darn good (which they have been of late for most New Zealand businesses), it's harder to eke out incremental gains."

The survey showed a net 22.3 percent of firms intended to boost their investment in the coming year, down from 25.2 percent and still the second highest reading in two years, while a net 24.2 percent wanted to hire staff compared to 25.5 percent in December. 

A net 23.7 percent see increased profitability compared to 31 percent in December, and pricing intentions were unchanged with 25.6 percent wanting to increase prices this year. 

Firms' inflation expectations increased to an annual pace of 1.73 percent from 1.6 percent, and anet 68.6 percent see interest rates rising, compared to 54 percent in December.

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