Business confidence has fallen for the second consecutive month, but companies are cautiously optimistic about their own prospects.
The National Bank Business Outlook survey for April found a net 19 per cent of businesses expected economic conditions to worsen in the next 12 months, a further fall inconfidence from the 13 per cent expecting a deterioration last month.
National Bank chief economist Cameron Bagrie said the survey was the first read on how companies were faring after the jumps in interest rates and the dollar. In March the Reserve Bank raised the benchmark official cash rate 25 basis points to 7.5 per cent - the first rate rise in over a year. The last month has also seen the New Zealand dollar reaching all-time post float highs against a weak US dollar.
"By and large businesses are becoming more circumspect. So we're seeing general business confidence has slipped, but if you look at a firm's own activity expectations, employment intentions, investment intentions, they're still consistent with reasonably solid growth."
Bagrie said traditionally the combination of a restrictive monetary policy and a high currency would have seen the economy on its knees. According to the survey, the real casualty has been the export sector with export intentions falling to a 14-month low.
A net 38 per cent of the agricultural sector and 21 per cent of manufacturers expect business conditions to deteriorate over the coming year.
The survey also notes that inflation pressure is on the up, with non-tradeable inflation rising to just over 4 per cent in the year to March.
Respondents are expecting inflation to remain over 3 per cent and 32 per cent of businesses are expecting to raise their prices in the coming year.
Inflation growth consistently over 3 per cent would detract from medium-term growth, said Bagrie.
"Sustained high inflation will come with a cost somewhere down the track."
Expectations
* Business pessimists outweigh optimists by 19 per cent.
