NZ business confidence turns negative

Agriculture was the most downbeat sector, with business sentiment, profits, employment and investment intentions all negative. Photo / Christine Cornege

New Zealand business confidence turned negative this month for the first time since the Christchurch earthquake in February 2011, led by a gloomy agriculture sector.

A net 2.3 per cent of firms were pessimistic about the general economy over the year ahead, turning from a net 15.7 per cent who were optimistic in May, according to the ANZ Business Outlook survey. A net 23.6 per cent expected their own businesses to grow in the next 12 months, down from 32.6 per cent last month, and hitting a three-year low.

The New Zealand dollar weakened to 68.12 US cents from 68.37 cents immediately before the 1pm release of the survey.

Agriculture was the most downbeat sector in this month's survey, with business sentiment, profits, employment and investment intentions all negative.

The average price for dairy products, New Zealand's largest commodity export, have fallen to their lowest level since August 2009 on the benchmark GlobalDairyTrade auction, prompting farmer confidence to slump to the lowest level in a decade in the second quarter. The Reserve Bank estimates a quarter of dairy farmers are operating in negative cash flow.

"The economy is showing signs of heading off-piste," said ANZ New Zealand chief economist Cameron Bagrie. "It's not a crevasse, but a crack has opened up."

In the agricultural sector, a net 28.9 per cent were pessimistic about the general economy, followed by the manufacturing sector where a net 16.9 per cent were pessimistic and construction with a net 3.4 per cent were pessimistic.

The services sector was the most upbeat, with a net 10.1 per cent optimistic, followed by retail with a net 6.8 per cent optimistic.

Sentiment in Canterbury was either flat or negative as the positive effects from earthquake rebuilding activity and agriculture waned, ANZ said.

Still, overall inflation expectations increased for the year ahead, lifting to 1.7 per cent from 1.6 per cent and marking the first gain since October last year.