New Zealand’s business sentiment falls in November, but remains at firm levels

New Zealand’s business sentiment eased in the month of November; however, it continues to remain at firm levels. In the general economic environment, sentiment fell again in November to 20.5 from October’s 24.5. Companies in New Zealand have become slightly more wary regarding the outlook of their own businesses. But in spite of weakening, business sentiment continues to be at strong levels, and is in line with ongoing strength in economic growth in the months ahead, noted Westpac in a research report.

In the construction sector, businesses continued to be the most optimistic. This is unsurprising given the major pipeline of construction projects in the years ahead, said Westpac. Moreover, sentiment in the agricultural sector rose sharply, possibly due to the recent increases in dairy prices. On the contrary manufacturers have become slightly less optimistic.

The proportion of businesses that intend to increase the number of employees has continued to rise, in line with the optimistic outlook for economic activity. Moreover, a large number of businesses also intend to increase their investment spending.

However, the credit space appears to be changing. Businesses report that it is becoming increasingly difficult for them to access credit, and most expect borrowing rates to push higher in the coming year, stated Wetspac.

On the inflation front, there are signs that pricing pressures have found a bottom. Expectations for inflation in the coming year rose to 1.49 percent, their first rise in four months. In a similar manner, the proportion of businesses planning in increasing prices in the month ahead pushed higher, although from relatively modest levels. This is likely to be a relief for the Reserve Bank of New Zealand, who continues to remain concerned about whether low headline inflation would hurt pricing pressures in the economy, added Westpac.

At 07:00 GMT the FxWirePro's Hourly Strength Index of New Zealand Dollar was highly bullish at 122.372, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -82.7289. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex