Business confidence falls in March as South Islanders feel gloomier

A net 3% of firms were optimistic about the general outlook for the economy in 2016. With special feature audio.

New Zealand businesses were increasingly negative about the overall state of play in March, although were more optimistic about their individual prospects.

A net 3% of firms were optimistic about the general outlook for the economy in 2016, down from a net 7% a month earlier, according to the ANZ Business Outlook survey of 444 companies. The agricultural sector was the most pessimistic, with a net 45.8%  expecting business conditions to deteriorate over the coming year.

Companies were more positive about their own business activity, with a net 29%  expecting to see growth, up from 26%  in February, and a net 13% see bigger profitability in the coming year, compared to 12%. Firms reduced their export expectations to a net 21% from 23% in February.

"Business confidence remains in the doghouse – however, firms are more optimistic about the outlook for their own business and this is a far more important signal for economic direction," ANZ Bank New Zealand chief economist Cameron Bagrie said in his report. "Firms' own activity expectations, in conjunction with expectations for employment, investment and profits, are a key litmus test for whether firms are getting on with it; they appear to be. Solid growth still beckons."

Mr Bagrie said a "clear North Island-South Island divide" was opening up, with the North Island far more optimistic while the South Island "looks as though it has been collared more by dairy unease."

"However, sentiment across the two islands often moves in opposite directions across indicators, so we can't draw universal conclusions," Mr Bagrie said.

The survey showed investment intentions fell to a net 11% expecting to spend more in the coming year, from a net 14% in February, though employment intentions rose to 16% from 12%. A net 1.7% expect easier access to credit, from 10.6% in February.

Residential construction activity is expected to grow by a net 36% of firms, up from 14% in February, while commercial construction intentions rose to 30% from 24%.

Pricing intentions edged down to a net 17.7% expecting to raise them in the coming year from a net 17.8% in February. Inflation expectations dipped to 1.38% from 1.39%, and a net 38.6% see interest rates falling in the coming year compared to 37.3% a month earlier.


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