Winter is coming – but it's business as usual

New Zealand firms were more optimistic about the economic outlook this month as a buoyant construction sector remains central to the country's growth in the coming year, ANZ Bank New Zealand says.

A net 6.2% of firms surveyed in the ANZ Business Outlook in April were upbeat about the economy's prospects for the year ahead, up from 3.2% in March, and 32% anticipate their own activity to expand, compared with 29% a month earlier. Construction is still the most optimistic sector in terms of the wider economy and its own activity, and residential investment intentions were unchanged at 36%, while commercial construction intentions slipped to 24% from 30%.

"The broader survey continues to point to solid economic momentum of around 3% growth," chief economist Cameron Bagrie said in his note. "Winter may be coming but it's business as usual across the broader survey; firms continue to get on with it despite low headline confidence."

Business confidence took a dent last year as milk prices slumped, weighing on the outlook for the country's dairy sector, and their inability to pass on rising costs kept firms pessimistic in the New Zealand Institute of Economic Research's quarterly survey, which doesn't cover farmers.

Today's ANZ report showed the agriculture sector was the most pessimistic, with a net 27% predicting the economy will deteriorate over the coming year, and just 6% expect their own activity to improve. A net 16% intend to pull back on livestock investment, compared to 4.9% in March, and a net 18% anticipate reduced profits in the coming year, the only sector to predict weaker earnings.

Across all sectors, a net 16% of firms see bigger profits in the coming year, up from 13% in March, and 22% see an increase in exports.

About 35% of those surveyed see interest rates coming down, compared to 39% a month earlier, while just 0.5% say it's easy to get credit. Firms' own pricing intentions were largely unchanged at 17% intending to raise them, while inflation expectations rose to 1.42% from 1.38% in March.

(BusinessDesk)