Business confidence high despite slip

Tauranga Chamber of Commerce chief executive Dave Burnett. Photo / George Novak

Business confidence may have dropped slightly, but it is still relatively high in the Bay of Plenty, despite falling confidence nationwide, according to the Tauranga Chamber of Commerce.

Nationally, business confidence continued to slide in the September quarter, as the positive outlook seen earlier in the year wasn't backed up by similarly strong actual economic activity, a Quarterly Survey of Business Opinion released by the New Zealand Institute of Economic Research showed.

Chamber of Commerce chief executive Dave Burnett said on average, confidence was high in the Bay, due to lucrative exports and innovation, as well as a resurgence of building in the region.

Falling dairy prices would have an impact in the Western Bay of Plenty, but it was difficult to know how big.

Nationwide a net 20 per cent of businesses remained optimistic in the September quarter, down from 32 per cent in the June quarter. The measure has fallen some 50 per cent from its peak in late 2013, excluding seasonal variations, and has moderated across all sectors and regions. The most recent quarter remains well above the historical average of net minus 5 per cent.

"None of these readings are panic stations, they're a sign things are coming off the boil," NZIER principal economist Shamubeel Eaqub said. "We had a very strong first half of the year and perhaps the second half of the year won't be as strong."

Since the start of the year, expectations for New Zealand's economic growth have slowed, with Treasury in August cutting its forecast for gross domestic product growth to 3.8 per cent in the year ending March 31, 2015, from a previous estimate of 4 per cent.

A faster decline in terms of trade from the highest levels in 40 years, a sharp drop in international dairy and log prices, New Zealand's largest and third-largest export commodities, and a slower pace of domestic inflation suggest overall economic momentum may be slowing.

Optimism about domestic trading activity, which is closely aligned with economic growth, slipped to a net 14 per cent positive in the quarter, seasonally adjusted, from a net 15 per cent positive in the June quarter, and from a peak of net 25 per cent positive in the last quarter of 2013.

"Confidence is a necessary but not a sufficient condition for decisions that drive economic activity," the survey said.

"When businesses are optimistic, they are more likely to hire and invest - but not always. In the last six to nine months, intentions have been positive, but hiring, investment and sales have not followed."

The services sector, which is New Zealand's largest sector in the economy, stalled in the quarter, NZIER said. The sector's hiring intentions fell to net 1 per cent positive from 8 per cent in the June quarter.

Confidence across the building and construction sector rose, with a net 25 per cent of firms hiring in the September quarter, up from a net 18 per cent in the June quarter.

- additional reporting by the NZ Herald