New Zealand business pessimism deepens, at six year-low

WELLINGTON, New Zealand–New Zealand business confidence hit a six-year low in July, with agriculture as the most pessimistic sector. “These survey results point to an economy needing a tailwind in the form of a lower OCR, but not CPR”.

Business confidence in the general economy has fallen for four months in a row and was back to levels last seen in March 2009.

THE New Zealand dollar fell after a survey showed deteriorating business confidence, and it may decline further with key events next week. The survey adds to expectations the central bank will cut interest rates again this year in the face of weak dairy prices and deteriorating external position and after governor Graeme Wheeler said the bank remains in easing mode. Two-year swaps held at 2.88 per cent and five-year swaps at 3.16 per cent.

A net 15 percent of firms were pessimistic in July about the general economy over the year ahead, up from a net 2.3 percent in June. Cashflow pressures will mount. The services sector and retailers both turned pessimistic this month.

“These readings in themselves do not mean the economy is becalmed”.

Political vagaries, the weather, winter blues, and the general feel-good (or not) factor could send a flutter through headline numbers; “it’s what owners are doing and feeling about their own business that matters most”.

On Friday, the ANZ survey showed residential construction intentions were non-existent at a meagre 6 per cent positive.

A net 19 percent of firms remained upbeat about their own prospects, though that slipped from 24 percent expecting better times.

“The economy is still moving forward”, Bagrie said. Some 15.5 percent of manufacturers were pessimistic.

“A weaker NZD and lower interest rates will eventually bring better economic times; that’s Plan A. It would be wise to also consider Plan B. Dairy prices have yet to base, rebuild stimulus is fading and there are worries around China and commodity prices – which could advance the doldrums”.