New Zealand’s business sentiment remains stable in August

Business sentiment in New Zealand was quite stable in August. It was little changed in the month from July as farmers were less gloomy. According to the ANZ report, the net number of businesses positive towards outlook in the coming year remained the same at 16 percent in August. The most optimistic were the service sector companies. Meanwhile, the agriculture sector showed the biggest change. It registered the biggest rise in sentiment in August.

Seasonally adjusted, business sentiment reached a 20-month high in August. Furthermore, the net number of companies that are positive towards their own businesses increased 2 points to a net 34 percent. Own activity expectations were up to a 21-month high. Investment intentions increased to 22 percent, the highest since March, while employment intentions rose 2 points to 19 percent. Businesses expecting an increase in profitability dropped one point to 22 percent.

Export intentions recovered to 20 percent in August, with both residential and commercial building intentions easing to 36 percent and 24 percent respectively. Pricing intentions of companies dropped 3 points to 15 percent, a four-year low.

Inflation expectations dropped to 1.4 percent from 1.5 percent. This is close to the levels witnessed in February/March when the Reserve Bank of New Zealand lowered the OCR citing declining inflation expectations as one factor, noted ANZ.

However, elsewhere, the New Zealand economy is performing well. The construction sector pipeline continues to be huge in spite of a maturing earthquake rebuild, while the tourism sector continues to boom. Meanwhile, interest rates are at historically low level, while widespread house price gains are providing consumers with a wealth and confidence boost, stated ANZ.

“Our confidence composite indicator – which combines both business and consumer sentiment – is pointing to GDP growth lifting towards 3½-4 percent over the year ahead. Supportive financial conditions (in spite of the strong currency) are providing a similar signal”, added ANZ.