Business confidence's normal winter cooling not so frosty

The ANZ Business Outlook survey showed a less frosty July than normal. Photo / File

New Zealand business confidence cooled less than normal in July as firms remained upbeat about their own activity and were keen to take on more staff.

A net 19 per cent of firms surveyed in the ANZ Business Outlook expect general business conditions to improve over the coming year, down from 25 per cent in June in a smaller monthly drop than is typical for the depths of winter. In seasonally adjusted terms, business confidence rose 2 points to a net 28 per cent, and a net 40 per cent of firms anticipate better time ahead for their own business in the coming year in the second highest reading of 2017, down from 43 per cent in June.

"The economic thermometer is warm. Being upbeat about activity - and prepared to invest and employ - translates into solid economic momentum," ANZ Bank New Zealand chief economist Cameron Bagrie said in his report. "It's pleasing to see business sentiment (and the consumer equivalent) hold up amidst a slow-down in pro-cyclical parts of the economy."

New Zealand's economy has got a new lease of life this year with the recovery in global dairy prices reviving the rural sector and adding to the twin planks of record tourism and immigration that have seen a rapid pace of growth in recent years.

ANZ's Bagrie said the agriculture sector was the most optimistic about the general economy, its own activity and profitability as a result of 44-year high terms of trade and strong commodity prices.

Of the 352 companies surveyed, a net 26 per cent expect to take on more staff in the coming year, up from a net 24 per cent in June, which Bagrie said was "tremendously encouraging" and shows "no let-up on the demand side of the equation" as firms struggle to find skilled staff.

Government figures this week is expected to show continued employment growth and steady wage increases. Household incomes have been stagnant in recent years as an expanding population has created more competition for jobs, although a tightening supply is expected to push up salaries as firms vie more aggressively for staff.

Today's survey shows firms' investment plans shrank to a net 23 per cent from 27 per cent in June. A net 25 per cent anticipate bigger profits in the year to come, down from 30 per cent in June, and a net 28 per cent plan to raise prices, down from 31 per cent. Still, a net 33 per cent see exports increasing over the coming year, up from 27 per cent last month.

Residential construction investment intentions shrank to a net 11 per cent in July from 18 per cent in June, while commercial construction investment intentions dropped to 5.6 per cent from 29 per cent in June. Government figures today showed new residential building permits dropped 7 per cent in June with a drop in new house consents issued.