NZ: Headline business confidence remains low – ANZ

New Zealand’s headline business confidence was little changed from last month’s low levels, but there was a mildly encouraging bounce in the own activity measure, according to Sharon Zollner, Chief Economist at ANZ.

Key Quotes

“Credit headwinds appear to be easing but most activity indicators remain at subdued levels.”

“Pricing indicators were fairly stable.”

“Headline business confidence remains low. A net 38% of businesses are pessimistic about the year ahead, versus 39% in November. Headline business confidence remains negative across all the five sub-sectors. However, firms’ views on their own activity, which has the stronger correlation to GDP growth, lifted from +7 to +16. The historical average is 28.”

“The economy is doing the hard yards at the moment. Positive forces remain, but the turn in housing, flattening off in net migration and lack of capacity in the construction sector are all dampening near-term growth. And the change in policy direction that comes with a new Government has no doubt caused a degree of apprehension amongst businesses. However, one headwind that does appear to be easing is the reported difficulty of getting credit. This may be one of the factors explaining the welcome, albeit modest, bounce in the own activity measure.”

“Activity indicators remain subdued across the board. 

• A net 3% of firms are expecting to lift investment, down 1 point. 
• Employment intentions lifted from -3 to +3, well off their July peak of +26. 
• Profit expectations bounced from -13 to -3 – still on the wrong side of zero.
• Export intentions were unchanged at +13.
• Residential construction intentions lifted from +17 to +22; commercial construction intentions jumped from 0 to +16. Both series are volatile.
• A net 25% of businesses expect it to be tougher to get credit, versus 41% last month.
• Firms’ pricing intentions eased slightly from +31 to +29. Inflation expectations were steady at 2.3%.”