NZ business confidence steady in August

Wednesday 31 August 2016 01:25 PM

NZ business confidence steady in August as farmers less gloomy, retailers, manufacturers less optimistic

By Jonathan Underhill

Aug. 31 (BusinessDesk) - New Zealand business confidence was little changed in August from July as farmers became less gloomy while retailers and manufacturers lost a bit of spring in their step.

The ANZ Business Outlook shows the net number of optimists edged down to 15.5 percent from 16 percent in July and down from 20.2 percent in June. The own-activity measure improved, with a net 33.7 percent seeing a pickup, compared with 31.4 percent in the previous month.

The biggest change in confidence came from the agricultural sector, where a net 11.1 percent of those polled were gloomy about the outlook for the New Zealand economy, an improvement on the 26.3 percent who were negative in the previous month. The pickup coincides with gains in the price of whole milk powder in the fortnightly GlobalDairyTrade auction, which jumped about 19 percent to US$2,695 a tonne on Aug. 16, the highest since October last year. Rising prices gave Fonterra Cooperative Group the confidence to lift its forecast farmgate milk price for the current season by 50 cents to $4.75 a kilogram of milksolids last week.

"The rebound in dairy prices, while not eliminating the ongoing challenges faced by the sector, certainly helps to mitigate some of the extreme downside risks," said ANZ chief economist Cameron Bagrie.

The services sector remains the most upbeat, with net optimists rising to 26.8 percent from 24.1 percent. Construction remained in second place although confidence fell to 18.5 percent from 24.2 percent. Retailers recorded a drop in confidence to 10.5 percent from 13.4 percent and manufacturer confidence sank to just 4.6 percent from 12.7 percent.

Among other measures in the survey, Investment intentions rose to 22 percent, the highest since March 2015, while employment intentions rose to 19 percent from 17 percent. Export intentions rose to 20 percent from 16 percent. However, both commercial and residential building intentions slipped to 23.8 percent and 36.4 percent respectively, from 37.5 percent and 52.2 percent.

Pricing intentions and inflation expectations also eased this month from July, suggesting the Reserve Bank will struggle to lift stubbornly low inflation. Firms planning to raise prices fell to a net 14.9 percent from 17.4 percent, while inflation expectations fell to 1.4 percent from 1.5 percent, which Bagrie said was "close to the levels seen in February/March when the RBNZ cut the OCR citing falling inflation expectations as one factor."

(BusinessDesk)

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