Damaged shops on Manchester Street in Christchurch's CBD. Photo / Geoff Sloan
New Zealand business confidence plummeted this month, and while the decline was worst in Canterbury, the latest survey shows gloom has set in nationwide following the devastating earthquake.
A net 8.7 per cent of businesses expect worse times ahead, according to the National Bank Business Outlook, a turnaround from last
month's survey where a net 34.5 per cent were upbeat about the next 12 months. That marks the second-largest monthly drop in the survey's history.
A wave of gloom has seen profit expectations evapourate and firms expecting to shed jobs. The downbeat tone was led by the Canterbury region, where headline confidence tumbled 92 points and firms' expectations of their own activity slumped to a negative 8 per cent from a net 47 per cent positive. The business survey follows the quarterly measure of consumer confidence, which tumbled into negative territory on the back of the quake.
"The implication is simple - this is far from a local issue," said National Bank chief economist Cameron Bagrie. "It's an economy-wide challenge. Facing exceptional times we should hardly be surprised to see exceptional movements in confidence."
The kiwi dollar edged lower after the survey to 75.97 U.S. cents from 76.10 cents immediately before it was released.
The Business Outlook export prospects dimmed somewhat in the latest month, with a net 24 per cent of firms expecting to lifts volumes of shipments overseas, down from a net 33 per cent in February. The fall in investment intentions was milder with a net 6 per cent of businesses expecting to invest more in the year ahead, down from a net 9 per cent in last month's survey.
Still, firms still intend to raise prices over the coming 12 months, with a net 29.4 per cent of firms signalling increases, up from 26.9 per cent.
"Rising pricing intentions portend an inevitable adjustment on the inflation front - watch this space," Bagrie said.
The survey's composite growth indicator suggests the economy would expand by 2 per cent this year, about half the pace reflected in the February survey.
Bagrie said strong commodity prices, lower interest rates and an improved outlook for the global economy would help underpin New Zealand.
"The seeds of an upturn are at hand but the ground obviously needs to stop shaking first," he said.
