NZ businesses become most pessimistic in 6 years, led by farmers

Friday 31st July 2015

New Zealand business confidence fell for a second month, to the most pessimistic in six years, led by the agricultural sector and construction companies.

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, according to the ANZ Business Outlook survey. A net 19 percent expected their own businesses to grow in the next 12 months, down from 23.6 percent last month.

The New Zealand dollar fell to 65.79 US cents after the survey was released, from 66.08 cents immediately before, on speculation weaker confidence adds to the case for the Reserve Bank to cut interest rates further this year.

Confidence was weakest among farmers and the agriculture sector as a whole, with a net 45.4 percent pessimistic, with negative readings for profits, employment and investment intentions. Construction firms grew more gloomy, with a net 28.6 percent pessimistic. The services sector and retailers both turned pessimistic this month, at -4.8 percent and -19 percent respectively. Some 15.5 percent of manufacturers were pessimistic.

The survey comes after this week's speech by Reserve Bank governor Graeme Wheeler in which he said further cuts to interest rates were likely this year. The latest GlobalDairyTrade auction this month saw dairy product prices, the nation's biggest export, sink to their lowest level since July 2009.

Dairy prices have yet to bottom, and "could still get uglier," said ANZ New Zealand chief economist Cameron Bagrie. "Rebuild stimulus is fading. With key economic engines sputtering, the economy risks taking on glider characteristics. Most worrying are signals out of China and movements in commodity prices in general, which impacts Australia too. Suddenly the skids are being put under New Zealand’s two largest trading partners."

Not all measures in the survey were negative. A net 8.9 percent saw real profits improving, up from 6.9 percent in the previous month and investment intentions were little changed from June at 10.8 percent. Export intentions rose to +19 from +14. Overall inflation expectations increased for the year ahead, lifting to 1.7 percent from 1.68 percent.

BusinessDesk.co.nz

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