Business confidence bounce suggests 'the wheels are not falling off'

Wednesday, 26 September 2018

Business confidence rose in September, but the number of companies saying they would increase investment in the coming year fell.

Business confidence has bounced, with companies more upbeat about both the economy and how they expect to perform in the coming year.

According to the ANZ business outlook survey, businesses are still broadly pessimistic about the general economy, but less so than a month ago, with a net 38 per cent expecting conditions to deteriorate over the coming year.

Asked about their own activity - a measure which tends to have a better match with how the economy will perform - a net 8 per cent expect an improvement, a 4 point improvement on August.

The survey was not all good news. Investment intentions continued to fall, with a net 9 per cent expecting to decrease investment in the coming year.

**READ MORE:

ANZ chief economist Sharon Zollner said while confidence levels continue to suggest growth will be weak, a rise in September increased the odds that the economy 'may have hit a pothole' rather than the wheels falling off.

* Growth figures question the confidence story, but don't settle the argument

* CTU blasts campaign by 'vested interests', as NZ economic growth surprises

* PM's office admits mistake over Ardern growth 'hint' claim

* NZ economy may not be as slow as business confidence suggests - for now**

ANZ chief economist Sharon Zollner said while confidence remained low, the signs in the latest survey were more encouraging.

'The growth signal coming out of the survey remains weak, certainly. But if the indicators continue to rebound, it will increase the odds that while the economy may have hit a pothole, the wheels are not falling off.'

The New Zealand dollar jumped slightly on the news, up around a quarter of a cent against the US dollar.

Excluding the continued weakness in investment intentions, the mood of the survey improved, with employment intentions and profit expectations up slightly.

BNZ head of research Stephen Toplis said there was no real jump in the mood of business.

'Both business confidence and own-activity indicators traditionally jump significantly between their August and September readings. That they did so again should be seen as nothing more than seasonality not a sudden surge in ebullience from the business community. At face value these indicators are still consistent with prospective [economic] growth of around 1.75 per cent - well below anything that anyone is forecasting.'

BNZ said it believed the fall in confidence reflected that companies were finding it harder to make money, which may be driven by margin pressure rather than weaker sales, meaning there could be a less immediate impact on economic growth.

National finance spokeswoman Amy Adams said the survey still showed weak confidence.

'Both consumers and businesses are markedly less optimistic. Business confidence and the important own-activity measure remain at levels not seen since 2009. At the same time cost of living and firms' pricing intentions continue to rise,' Adams said in a statement.

'The Government should acknowledge the harm it is doing rather than trumpet its performance with carefully edited claims about the economy.'