Business confidence fell further in August, according to the latest ANZ Outlook survey, prompting a warning that lower investment by firms could dent GDP growth.

A net 50 per cent of 369 firms surveyed in the ANZ business outlook survey for August expected general business conditions to deteriorate in the coming 12 months, 5 points lower than July's result.

"It is rare for this series to be negative. If this weakness is sustained, it will not bode well for GDP growth heading into the end of the year," said ANZ chief economist Sharon Zollner.

Employment intentions fell 8 points to -6 per cent. No sectors were positive.

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"This suggests weaker employment growth over coming months, consistent with stability rather than improvement in the labour market," she said.

In July the survey showed confidence falling to levels not seen since the global financial crisis in 2008.

That contributed to a revision of forecasts by many economists – including the Reserve Bank.

But, in what may offer some comfort to the Government, firms' views of their own activity remained steady.

Zollner noted that firms' perceptions of their own prospects "are a much better gauge of actual economic outcomes".

These had stabilised in August, with a net 4 per cent expecting an improvement – although this was still well below the long-term average of positive 27 per cent.

The New Zealand dollar dropped by about quarter of a US cent to around US66.80c, just after the report's 1pm release.

Zollner also acknowledged the political debate that has been raging about the significance of confidence surveys.

In a major speech on the issue this week Prime Minister Jacinda Ardern acknowledged the serious downturn in business confidence but argued that business expectations did not correlate with GDP performance.

"We have been looking closely at the data," Zollner said. "What is clear is that asking firms about their actual intentions garners more accurate indicators for future GDP growth than asking about their expectations."

She emphasised that, in particular, investment intentions from the survey provide a very good directional signal for GDP growth.

"In August, a net 5 per cent of firms reported they intend to reduce investment [down 6 points]," she said. "If this weakness is sustained, it will not bode well for GDP growth heading into the end of the year."

Westpac senior economist Michael Gordon said he suspected "that a large part of the fall in business confidence reflects firms' discomfort with the new Government's policies, especially the planned changes to labour laws."

He noted a similar fall in confidence in mid-2000, when the Government was passing the Employment Relations Act.

"GDP growth has slowed from its peak in 2016. However, the weight of evidence points to a shift to more modest growth rather than a slump," he said. "Moreover, we expect that the next phase for the economy will be a pickup in momentum over the next year, supported by increased government spending."

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