Pessimism grows on economic outlook

  • 31/08/2015
Pessimism grows on economic outlook

Gloom has deepened among New Zealand firms which have scaled back their intentions to take on new staff or invest in their business.

A net 29 percent of firms in August were pessimistic about the general economic outlook over the coming year, deteriorating from a net 15 percent in July, according to the ANZ Business Outlook.

A net 12 percent of companies in August expected their own activity to expand, down from 19 percent a month earlier, and a net 1.5 percent expected shrinking profits, compared to a net 8.9 percent expecting growth in July.

"Confidence may not be the economic engine that drives growth [ultimately incomes do], but it's critical for keeping the economic wheels turning," ANZ Bank New Zealand chief economist Cameron Bagrie said.

"Lacking confidence, firms don't invest, or take a punt on that new employee. Activity can grind to a halt. That's a growing risk."

New Zealand's strong growth over the past couple of years is expected to slow down as slumping global dairy prices erode dairy export receipts, and as the tailwind from the Canterbury rebuild starts tapering off.

Ratings agency Standard & Poor's last week said it anticipates gross domestic product will expand 2.4 percent in 2016, slowing from a three percent pace in 2015.

Monday's survey was the fifth monthly decline in business confidence and its second in negative territory, with agriculture the most downcast among the sub-sectors.

Of the 473 respondents, a net 0.4 percent expected investment to contract, compared to a net 11 percent seeing expansion in July, while a net 2.8 percent plan to take on new staff, down from 9.3 percent.