Confidence slips for the fifth month in a row

By Brian Fallow

WELLINGTON - Firms' confidence about the general business climate has slipped for the fifth month in a row, but they remain more optimistic about their own prospects.

In the National Bank's monthly survey, business confidence continued its retreat from the euphoric levels of early 1999.

A net 24 per cent of respondents expected the economic environment to improve over the next 12 months, down from 29 per cent in June.

But a net 38 per cent expected their own businesses to pick up in the year ahead, unchanged from last month, with manufacturers and service firms the most confident.

Manufacturers' export expectations, which had slid over the previous four months, recovered some ground. The exchange rate with Australia has improved and economists' forecasts for growth in New Zealand's trading partners generally and in Asia particularly were improving.

"A recovering Asia is very important for New Zealand primary producers as, up to the onset of the Asia crisis, two-thirds of the growth in demand for New Zealand commodities was from Asia," National bank chief economist Brendan O'Donovan said.

Firms' investment intentions had held up at healthy levels, but only a net 8 per cent expected to be increasing their payrolls.

Mr O'Donovan said an encouraging feature of this month's survey was that price-raising intentions remained at low levels.

"The Reserve Bank has assumed that the one-off price shocks from electricity, rates and petrol will not have a marked flow-on effect into firms' pricing intentions and wage-setting behaviour.

"To date this appears to be the case and will allow short-term interest rates to stay around current levels for a while yet."