Dominick Stephens, Research Analyst at Westpac, notes that after plunging in November, New Zealand’s business confidence rebounded slightly in December.
“After throwing their toys out of the cot following the election, respondents to the ANZ Business Outlook Survey seem to have had a bit of time out and have calmed down a little. Most questions in the survey improved on November’s dire reading. However, the improvement was small and both general sentiment and firms’ confidence in the outlook for their own activity remains low. To the extent that this month’s reading is a more sober assessment of the outlook, it still makes worrying reading.”
“Our analysis finds that under Labour Governments, business confidence in this particular survey tends to be 22 points lower than under National Governments, even when economic conditions are the same. But business confidence is currently 38 points lower than it was in September, and 63 points lower than in June. This might be an especially strong reaction to the change of Government. But we would also ascribe a large portion of the drop to the economy losing momentum.”
“Firms’ assessment of their own activity rebounded, but remains at levels last seem during the 2015 “dairy downturn”, and prior to that not seen since the 2009 recession.”
“One of the big things weighing on the economy at present is difficulty accessing credit, particularly for property developers. Reported “ease of finding credit” in this month’s survey improved, but remains low. Overall, we would describe the credit situation as stable but not improving, and that is borne out by today’s survey result.”
“Firms’ intentions to invest and employ remain very low, and rebounded by less than other measures in the survey. We see this as key evidence in favour of our view that 2018 will be a fairly soft year of economic growth, in contrast to the very bullish forecasts espoused by the Reserve Bank and Treasury.”
“Gauges of inflation and intentions to lift prices stepped up last month, and remained steady this month. This is a slight challenge to our view that inflation will remain low next year and the Reserve Bank will remain on the sidelines for a long time (but is not enough to change our view).”