Declining rural pulse a worry in confidence survey

BUSINESSDESK: The agriculture sector is the least confident in the October National Bank Business Outlook which shows overall business confidence flat-lining.

A net 17% of respondents expect business conditions to improve in the year ahead, unchanged from last month. A net 25% in the agriculture sector are pessimistic, the lowest reading in the survey.

"The agriculture sector is the nucleus of our income generating capacity. So when the rural pulse keeps getting weaker we take note," chief economist Cameron Bagrie says in his report.

Sentiment in the agriculture sector has been sliding for months because of the high New Zealand dollar, a lower dairy payout, nervousness about environment regulation and the levelling out of a production boost from good weather, he says.

A decent recent  lift in dairy prices had been eroded by the elevated kiwi dollar.

National Bank says the domestic economy is taking up the slack of a hiatus among exporters but the current economic mix "doesn't pass the smell test" for an economy with large debt levels.

A net 26% of respondents expect more activity out of their business during the coming year, down 3 percentage points on the previous survey.

Since December 2011 this measure of confidence has not showed a clear trend.

"The pattern has been up, up, up, down, down, down, up, up, up and now down," the report says.

This suggested a patchy stop-start economy.

Export intentions eased to plus 14 from plus 18, employment intentions eased to plus four from plus nine and profit expectations dropped to plus four from plus eight.

Residential and commercial construction intentions eased but investment intentions bucked the general mood and lifted.

Pricing intentions are at a three-year low, with a net 15% of firms expecting to lift prices.

"The inflationary genie remains in the bottle. Were it not for a pending city rebuild and the robustness of the Auckland property market, the case for an interest rate cut would be compelling," Mr Bagrie says.