Business confidence snaps five-month decline as firms get less gloomy

Of the 468 respondents, a net 7.2% expect to increase investment over the coming year.   ANZ Senior Economist Phillip Borkin talks about the business confidence survey on NBR Radio and on demand on MyNBR Radio.

New Zealand businesses grew less gloomy about the economy's prospects in September, snapping five months of declining confidence,

These results occur in a period when dairy prices rallied from lows, soothing concerns about the strength of the nation's biggest export. A net 19% of firms were pessimistic about the general outlook for the economy over the coming year, an improvement on 29% in August, according to the ANZ Business Outlook survey. A net 17% of firms see their own activity expanding in the coming year, up from 12%, led by construction and manufacturing.

"After five successive months of declines in the headline figure – and substantial declines at that – the turnaround is welcome," ANZ Bank New Zealand economist Philip Borkin said in a note. A rebound "was apparent across the broad survey, and importantly, in key survey indicators that more closely correlate to GDP growth."

The business confidence survey comes after an ANZ-Roy Morgan consumer confidence report showed an improved sentiment among New Zealanders, ending a downward spiral as an increasingly gloomy rural sector, an obvious peak in the Canterbury rebuild and a threatening global slowdown weigh on the collective heads of the nation.

Of the 468 respondents, a net 7.2% expect to increase investment over the coming year, an improvement on the 0.4% predicting scaled back investment, and a net 3.2% anticipating taking on more staff over the next 12 months, largely unchanged from 2.8% in August.

"Hiring and investment intentions are soft, but more consistent with maintaining the status quo than shedding staff or cutting back on spending aggressively," Mr Borkin said.

A net 37% of firms predict unemployment decreasing in the next year, down from 41% in August, while 15% see capacity utilisation increasing from 11% from a month earlier.

Profit expectations also improved, with a net 5.5% expecting increased returns in the coming year, compared to a net 1.5% picking smaller earnings, and a net 23% of respondents intending to raise prices, up from 16% a month earlier. Inflation expectations were relatively stable at 1.69%.

Residential construction intentions improved to a net 29% expecting expansion, from 12% in August, while commercial work intentions grew less negative with 4% experiencing a contraction, down from 9.4% a month earlier.

More firms expect export growth in the coming year at a net 18% , up from 11%, while livestock investment intentions grew less negative, with a net 24% expecting investment to contract, down from 39% in August.