Business confidence falls on world outlook

By Phil Boeyen, ShareChat Business News Editor

Tuesday 10th April 2001

A bleaker view of the global economy appears to be behind the latest fall in business confidence.

The New Zealand Institute of Economic Research says business confidence slipped back into pessimistic territory in the March 2001 quarter, following last quarter's rebound in confidence.

"The number of firms pessimistic about the general business situation in the next six months now marginally outweighs the number of firms who are optimistic," the institute says.

"The fall in business confidence appears to be due to concerns about the global economic outlook."

The NZIER says export growth eased in the March quarter and while domestic trade growth remained positive, it has also eased slightly in all sectors.

"The slowing domestic trade growth in New Zealand is due to fairly muted domestic demand. Household spending growth continues to be constrained by high debt levels."

Although only a net 9% of manufacturers and builders reported an increase in output during the quarter, and investment intentions for new buildings remain negative, the survey shows intentions to invest in plant and machinery are still positive.

"Overall, we interpret the decline in the general level of business confidence as a warning sign, rather than as an indicator of imminent stalling of growth.

"The easing price pressures should give the Reserve Bank the confidence to reduce interest rates further, giving a boost to the domestic recovery."

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