Business confidence remains low in May, depressed by slowing economic growth and rising costs, the National Bank said today.
The National Bank's monthly Business Outlook showed a net 50 per cent of companies expected business conditions to worsen over the coming year, a slight improvement from the net
55 per cent in the April survey.
However, the move "lacked conviction", and companies' own activity outlook remained negative, said National Bank chief economist Cameron Bagrie.
"It is worrying to see confidence remain so sluggish," Mr Bagrie said, noting that since the last survey the currency had softened, rain broke drought conditions, global sentiment had stabilised, a free trade agreement had been signed with China and the Government had delivered tax cuts in its budget.
A net 4 per cent of companies expected less activity over the next year, unchanged from April.
"The economy is transitioning. Relative price signals, including high mortgage and deposit rates, are incentivising less spending and more squirrel-type behaviour," he said.
"It's all part of the inevitable rebalancing as growth rotates from the spending to the earnings-side of the economy."
Recent retail and employment data has been surprisingly poor, adding to signs the economy was slipping backwards.
With growth slowing, businesses were hoping for lower interest rates, but rising oil prices and capacity pressures meant it would be difficult for the Reserve Bank to deliver despite weakness in the housing market.
Companies' pricing intentions were at a 22-month high with a net 36 per cent of respondents expecting to increase prices over the next year, up from 31 per cent in April.
More companies - a net 9 per cent - were expecting fewer staff over the year, and flat growth was in the offing according to the bank's composite indicator.
Profit expectations rebounded slightly, although a net 25 per cent still expected lower profits over the year.
- NZPA
