Business shows more confidence

ANZ Bank logo. Photo / NZME.

Headline sentiment down on peak of last February but above long-run average after post-election rebound

Business confidence has rebounded in ANZ's monthly survey, the first since the general election.

A net 27 per cent of respondents are positive about general business conditions over the year ahead, up from a two-year low of 13 per cent last month. Headline sentiment is still well down on the peak of a net 71 per cent optimistic last February but remains above its long-run average.

"We put September's decline in confidence down to politics, and this month we say the same," ANZ chief economist Cameron Bagrie said.

Firms' expectations of their own activity are unchanged at a net 38 per cent positive.

Expected profitability has eased slightly, from a net 19 to a net 17 per cent expecting improvement.

"That is well down from the peak of 45 in February, but solid," Bagrie said.

Investment intentions have eased from a net 20 to a net 16 per cent expecting to increase investment over the year ahead, despite a lift in capacity utilisation.

A net 19 per cent of firms expect to increase staff numbers over the year ahead, down two points on September.

Bagrie said that when a mild seasonal element to the survey was stripped out, firms' expectations of their own activity and profits and their employment and investment intentions all lifted a smidgen to levels that might not be stellar but looked solid.

A net 24 per cent of respondents expect to raise their prices over the next three months, up five points from September.

The economy was in an enviable position, experiencing strong growth and low inflation, Bagrie said.

Even a factor that will detract from growth, reduced dairy incomes, had had a mixed flow-on into the survey's indicators.

"Agriculture sector confidence is naturally weaker, and more so in dairy-aligned regions, but firms' own activity expectations remain positive, and employment and investment intentions remain the same," he said.

"Amidst all the bigger picture stuff that sentiment and the economy can oscillate around - migration, house prices, interest rates, the New Zealand dollar, commodity prices and the global scene to, name but a few - it's sometimes the small and underappreciated factors that matter.

"It's the collection of small incremental decisions by policy-makers, businesses, individuals and households that ultimately make up an economy."

It might be those microeconomic changes that were delivering the real economic muscle and allowing the economy to run faster without blowing a head gasket, he said.

Confidence grows
• A net 27% of respondents are positive about general business conditions over the year ahead, up from 13% last month.
• A net 17% expect improvement in profitability.
• A net 16% expect to increase investment.
• A net 19% expect to increase staff numbers.