Business confidence slips from 19-month high as agriculture turns gloomy

New Zealand business confidence fell from a 19-month high in March as the agricultural sector turned gloomy, seeing falling profits and less employment as drought prevails in the North Island.

A net 35 percent of firms surveyed expect general business conditions to improve in the year ahead, according to the ANZ Business Outlook, down from 39.4 percent in the February survey.

Confidence in Northland, the first region where drought was declared this summer, "literally tanked", though the survey results were mixed in other drought-affected regions, ANZ chief economist Cameron Bagrie says in a statement. Taranaki recorded the strongest confidence, which he attributes to the ramping up of oil and gas exploration.

A net 9.9 percent of agricultural firms surveyed saw general business conditions worsening in the next 12 months, the only sector of five with a gloomy outlook.

Agriculture was also the only sector to see falling profits, with a net 33.4 percent seeing weaker earnings in the next 12 months, and was the only sector to expect fewer workers, at -15.4 percent, and lower exports, at -5.1 percent.

Firms seeing a pickup in their own business activity in the year ahead fell to a net 32.4 percent from 37.6 percent.

Inflation expectations were little changed at 2.32 percent but pricing intentions rose, with a net 22.3 percent expecting to raise prices, up from 18.2 percent in last month's survey.

Employment intentions remained strongest in the construction sector, with a net 45.2 percent of firms expecting to hire workers. Residential investment intentions eased to 45.5 percent from 50 percent, while commercial slipped to 20 percent from 22.8 percent, though both remained elevated.

Confidence in the general economy in the construction sector was overtaken by services in the latest month, on 45.1 percent and 46.7 percent, respectively.

The survey is the first to probe business sentiment since the release of economic growth figures for the fourth quarter, which showed the economy grew at a 1.5 percent pace, almost twice what the central bank had predicted.

(BusinessDesk)