NZ: Business confidence turned sharply negative - ANZ
Sharon Zollner, Chief Economist at ANZ, notes that New Zealand’s business confidence turned sharply negative this month as uncertainty around changing Government policy, a softer housing market, and difficulty getting credit are likely culprits.
“Weakness was apparent across all activity indicators, but pricing intentions, inflation expectations and interest rates expectations all increased.”
“There is a non-trivial risk, given an economy at a delicate juncture, that the fall in activity expectations could prove to be self-fulfilling. Outcomes will depend crucially on how prolonged the apprehension proves to be.”
“Businesses are not happy. A net 39% of businesses are pessimistic about the year ahead, the lowest level since early 2009, and a decline of 29 points from the previous month. Headline business confidence is negative across all the five subsectors. It is weakest among agricultural firms, while the sharpest fall came in the retail sector (down 35 points).”
“This month’s survey responses were received after the final Government make-up was decided. However, it would be too simplistic to ascribe the full move to the change of Government. There is a lot else going on. The softening in house price inflation is one obvious factor that shouldn’t be overlooked, as is the reported difficulty of getting credit (a net 41% of businesses expect it to be tougher to get credit, up from 31%. This is the highest since the question was first asked in mid-2009).”