Business optimism jumps on back of construction and tourism

Construction and services firms were the most upbeat with a net 37 per cent and 36 per cent respectively expecting the economy to improve. Photo / Greg Bowker

New Zealand businesses grew more optimistic this month as strong construction and tourism sectors continued to support economic activity, says ANZ Bank New Zealand.

A net 20 per cent of firms surveyed in the ANZ Business Outlook expect better economic conditions in the coming year, up from a net 11 per cent in May, and reaching a six-month high.

They were even more upbeat about their own businesses, with a net 35 per cent expecting an increase in their own activity, compared to 30 per cent a month earlier.

Construction and services firms were the most upbeat with a net 37 per cent and 36 per cent respectively expecting the economy to improve, and a net 59 per cent and 39 per cent seeing their own activity expanding.

Construction intentions remained high with a net 29 per cent expecting residential building to increase and a net 28 per cent seeing more commercial work, compared to 36 per cent and 29 per cent in May.

Export intentions crept up to 23 per cent in June from 21 per cent in May.

"The past month has hardly seen a suite of good news, yet the good still outweighs the negatives," ANZ New Zealand chief economist Cameron Bagrie said in his report. "A firming in business sentiment, firms' own activity expectations and other components of the survey flag accelerating economic momentum."

New Zealand's economy has been supported by a housing boom driving construction activity, primarily in Auckland, where there's a shortage of supply, and as a record number of tourists visit the country.

A firming in business sentiment, firms' own activity expectations and other components of the survey flag accelerating economic momentum.

Cameron Bagrie

At the same time, record net inflows of migrants have driven up demand for consumer goods and housing, while also filling a growing number of jobs and keeping wages static.

The ANZ survey of 399 firms showed the agricultural sector was still pessimistic about the economy with a net 17 per cent expecting it to deteriorate. Livestock investment intentions fell in the month, with a net 18 per cent expecting to scale back their investment, compared to 6.9 per cent seeing a decline in May.

Across all sectors, firms were more optimistic in their profit expectations with a net 22 per cent seeing an increase, up from 20 per cent in May. New hiring intentions were flat at a net 18 per cent looking to take on new staff.

Pricing intentions dipped with a net 20 per cent looking to raise prices in the coming year, down from 22 per cent in May, while inflation expectations increased to 1.49 per cent from 1.39 per cent.