NZ business confidence falls in May for first time in 7 months

Thursday 31st May 2012

New Zealand business confidence fell for the first time in seven months amid increased uncertainty about the global economy as Europe's debt crisis spreads, according to the National Bank Business Outlook.

A net 27.1 percent of surveyed respondents expect better times for the economy in the year ahead, down 9 points from April, while a net 34.9 percent of firms predict their own activity will improve, down 2 points. That number remains above the historic average of a net 26 percent.

All sectors except construction showed a decline in sentiment. A net 53.8 percent of businesses expect a lift in residential construction-related work, up from 50.8 percent in April. Commercial construction was unchanged on 36 percent.

Export intentions fell to a three-year low down 8 points to 14.9 percent.

"The fall in export intentions appears to reflect growing concern over the global economy, and easing commodity prices," chief economist Cameron Bagrie said in his report. "This is not the stuff of which as export-led recovery is made."

The report come a day after the New Zealand Institute of Economic Research's quarterly forecasts paint a dour picture of the local recovery, with principal economist Shamubeel Eaqub picking just 1.5 percent growth this year.

The New Zealand dollar's recent six-month low came after the survey was complete, the bank said. The kiwi has traded as high as 84.70 US cents this year, falling to a low of 74.53 cent low last week. It recently traded at 75.28 cents down from 75.35 cents at 8am this morning.

Pricing intentions were unchanged on 18 percent, while inflation expectations slipped back 2 basis points to 2.64 percent. The Reserve Bank kept the official cash rate unchanged at 2.5 percent last month, with traders now beating the central Bank will cut 40 basis points from the OCR over the next 12 months, according to the Overnight Index Swap curve.

BusinessDesk.co.nz

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