NZ business confidence falls to two-year low in September 2017 - Westpac

New Zealand business confidence fell to a two-year low during September, broadly reflecting election uncertainties as firms' own activity outlooks also eased, consistent with the view that the economy is cooling a little, notes Shyamal Maharaj, Research Analyst at Westpac.

Key Quotes

“New Zealand business confidence fell to a two-year low (0.0) in September, following a slightly soft result in August. This is likely to be a reflection of election uncertainty (the survey was held in early September, before the General Election). When asked about their own activity outlook, firms confidence also eased to 29.6, a low not seen since the first quarter of 2016. This is consistent with other recent signs that the economy is cooling a little.”

“In particular, construction intentions fell sharply in both the residential and commercial spaces, which is in line with recent soft data on construction. Our view is that construction activity is facing headwinds in the way of tighter credit conditions and access to skilled labour. Indeed, in this survey firms reported ongoing difficulty accessing credit and pricing intentions within the construction sector continued to rise. Putting this all together, we remain of the view that the issues facing the construction sector will have a protracted impact on economic activity for the year ahead.”

“Capacity utilisation fell sharply in the survey. Conversely, inflation expectations rose by 10 basis points to 1.98% (August: 1.88%), which is underpinned by the rise in overall pricing intentions and higher fuel prices observed over the month.”

“This survey supports our slightly softer view on the economic outlook. The own activity results supports a GDP forecast of 2.5-3%, with economic growth for the year likely to ebb on the softer side of the range.”

“NZD/USD fell by 20 basis points and swaps fell by 1 basis point in reaction to the survey.”