Business confidence has taken a step back.The National Bank's monthly survey of the business mood shows overall confidence fell eight points in April and the crucial “own activity” part of the questionnaire fell six points.Companies' expectati
Business confidence has taken a step back.
The National Bank’s monthly survey of the business mood shows overall confidence fell eight points in April and the crucial “own activity” part of the questionnaire fell six points.
Companies’ expectations about their profits fell five points.
The overall figure is still comparatively high – “decidedly robust” is how the bank’s chief economist, Cameron Bagrie, puts it.
The fall follows a minor overall fall last month, although then the “own activity” responses continued to rise, unlike this time.
Over the period since the last survey most of the business news has been positive; the government delivered a relatively business friendly budget and Fonterra announced an unexpectedly high payout for the season.
Against that the global economic news has been mostly poor, and the Reserve Bank began to lift its official cash rate – although that had not really flowed through into real interest rates by the time the survey period ended.
Inflation intentions in particular have soared – probably a result of the widespread publicity about the forecast inflation of 5.8% in the government’s budget, the result of GST increases, the emissions trading scheme, and rises in accident compensation levies.
Of more concern will be the drop in investment intentions. The overall level has fallen below its historical average, Mr Bagrie points out.
Firms also expect their ability to get credit for expansion to become harder over the year. It is not clear though how much of businesses’ unwillingness to invest is a function of tight credit conditions: other surveys, and anecdotal evidence, suggest it is more a question of firms taking a cautious approach rather than banks’ unwillingness to lend.
Whichever of the two factors is the more dominant, the fact remains that a clear firm pick up in business investment is “the missing ingredient for a broadening of the recovery,” Mr Bagrie said.
