Business confidence on the rise

Navigation for News Categories

The construction sector was the most upbeat.
Photo: RNZ / Samuel Rillstone

Business confidence keeps rising as firms believe they and the economy are past the worst of the economic downturn, while also being buoyed by the change of government.

ANZ’s December monthly survey showed a net 33 percent of respondents expected the overall economy to improve over the next 12 months, the highest since March 2015.

A net 29 percent said their own business outlook was positive, a two-year high.

Chief economist Sharon Zollner said the survey pointed to better times all round.

“[The] survey suggests the outlook is improving – and the backward-looking questions suggest that experienced activity may also be past the worst.”

But she said the solid rise in the headline confidence rate clearly had a political element following the election a centre-right government.

The survey’s inflation indicators were mixed, with expectations of inflation easing to a two year low of 4.6 percent from 4.79 percent, but more than three quarters were expecting higher costs, while more than half expected to raise their prices.

“The data is clearly inconsistent with annual inflation anywhere near the 2 percent target midpoint, and the stall in the downward trend is not encouraging.

“The RBNZ has made it clear that they have zero tolerance for more delays in bringing inflation down,” Zollner said.

Other parts of the survey showed respondents more upbeat about profits, exports, employment, along with a strong rise in residential building expectations.

Construction was the most upbeat sector, with improved optimism for manufacturing and services.

Zollner said the recent growth numbers showing a surprise contraction in the three months ended September showed the Reserve Bank had got the traction it wanted to slow the economy with its high interest rates, but that did not mean it had won the war against inflation.

“The question of how much pain is needed to get inflation all the way down to 2 percent isn’t in fact settled.”

Zollner said financial markets were getting ahead of themselves in pricing interest rate cuts from the middle of next year, although the RBNZ would be less likely to contemplate rate rises as signalled in its last monetary statement.