NZ business confidence rises in May, construction sector upbeat

New Zealand firms grew more confident about the state of the local economy for the third month in a row, with gains most evident in construction, ANZ Bank New Zealand says.

A net 11% of firms surveyed in the ANZ Business Outlook in May were upbeat about the economy's prospects for the year ahead, up from 6% in April, with a net 30% positive about their own prospects over the next year, compared with 32% a month earlier.

Construction remained the most optimistic sector at net 29% positive for the year ahead, with residential investment intentions unchanged at a net 36% while commercial construction intentions rose to net 29% from net 24%.

"The economic trail remains well groomed – migration is strong, house prices are booming, the construction and tourism sectors are slaloming incredibly well," chief economist Cameron Bagrie said in his note. "Financial conditions are still supportive despite the still-high New Zealand dollar causing some slushiness. There are few sectors we can point to as being on the rocks.

"New Zealand is in the enviable position of having credibility, competency, and stability in the government arena. It's something we can take for granted, and is a missing base in many countries around the globe."

Business confidence dipped into negative territory last year as milk prices slumped and weighed on the dairy sector's outlook but has been recovering lost ground in recent months.

Today's ANZ report showed sentiment in the agriculture sector was still the most pessimistic, though it had improved with a net 19% predicting the economy will deteriorate over the coming year compared to 27% in April. Expectations for their own activity were unchanged at 6% predicting an improvement. A net 7% intended to pull back on livestock investment, an improvement from 16% in March, and a net 7.6% anticipated reduced profits in the coming year, the only sector to predict weaker earnings.

Across all sectors, a net 20% of firms see bigger profits in the coming year, up from 16% in April while 21% see an increase in exports. Some 22% of firms intend to raise their prices, though that was higher in the construction sector with net 30% of companies set to increase prices compared to agriculture at net 9%.

Fewer businesses see interest rates coming down at a net 29% from 35% in April. Inflation expectations fell to 1.39% from 1.42% in April.

(BusinessDesk)