Service sector leads jump in confidence

Photo / NZ Herald

New Zealand business confidence rose to a six-month high in November, signalling a pick-up in the economy.

A net 14.5 per cent of businesses were confident about the general outlook for the economy over the coming year, up from 10.5 per cent last month, according to the ANZ Business Outlook survey. A net 32 per cent of firms see their own activity expanding in the coming year, up from a net 23.7 per cent in October.

While the New Zealand economy is being weighed down by slower housing markets in Auckland and Christchurch, a surplus of labour and low prices for dairy products, it is being bolstered by record tourism and migration, wider housing market strength outside of Auckland, and a lower New Zealand dollar, according to ANZ Bank, which is the only bank of 14 polled by Reuters that doesn't expect the Reserve Bank to cut interest rates next month.

"Our composite growth indicator [combining sentiment measures from business and consumers] is flagging the potential for GDP growth of north of 3 per cent," said ANZ New Zealand chief economist Cameron Bagrie.

"After a half-year hiatus, it's pretty clear the economy is starting to pick up again."

The service sector is the most optimistic, with confidence in the outlook for the economy improving to a net 26.7 per cent from 18.3 per cent last month. Agriculture recorded the worst reading with a net 12.5 per cent of firms pessimistic about the outlook, although sentiment had improved from the 20.5 per cent that were pessimistic last month.

Optimism improved in the construction sector, with a net 23.5 per cent of firms optimistic about the economic outlook, up from 5.7 per cent last month. Meanwhile sentiment weakened for the retail sector, with a net 12.7 per cent optimistic from 14.1 per cent last month, while manufacturing firms were equally split between pessimism and optimism, down from a net 9.1 per cent who were optimistic last month.

Profit expectations across the survey improved, with a net 14.9 per cent expecting an uptick in profitability, ahead of the 12.7 per cent last month. Investment intentions also rose, with a net 14.6 per cent expecting to make further investments in their businesses, up from 12 per cent last month. Employment intentions improved, with a net 13.5 per cent expecting to hire more workers, up from 12.1 per cent last month, and export intentions nudged higher to 22.8 per cent from 22.4 per cent.

Commercial construction intentions improved to 37.5 per cent from 20.7 per cent, while residential construction expectations slipped to 23.1 per cent from 38.7 per cent. BusinessDesk