Bay bucks trend of falling confidence

SPENDING: People shopping at the Warehouse in Napier. PHOTO/STEVEN MCNICHOLL

Business confidence is high in the Hawke's Bay region, despite dipping around the country, according to the Hawke's Bay 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 this week showed.

Chamber of Commerce chief executive Wayne Walford said regional development - including the opening of Number One Shoe Warehouse and Big Save Furniture's national distribution centres in Hawke's Bay and a 7:1 ratio of exports to imports from the port - was keeping the region's business confidence high.

The distribution centres had created lots of jobs, and contributed to high employment in the region, he said.

A greater use of Hawke's Bay professionals, particularly in architecture, project management, science and research, also indicated high business confidence, Mr Walford said.

"People are realising they don't need to leave Hawke's Bay for professional work," he said.

New Zealand-wide 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 princpal economist Shamubeel Eaqub said yesterday.

"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 the 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 net 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.

Manufacturing was mixed, as output rose to net 21 per cent positive from net 6 per cent, while domestic sales fell to a net minus 1 per cent from net 15 per cent positive in the June quarter.

The outlook for exports improved, with a net 18 per cent expressing optimism, from net 10 per cent the previous quarter.

Ease of finding skilled labour improved, with a net minus of 26 per cent saying it was difficult to find qualified staff, from a net minus 32 per cent the previous quarter, while unskilled labour was at net minus 7 per cent, from net minus 11 per cent in the June quarter.

The survey comes after Reserve Bank Governor Graeme Wheeler kept interest rates on hold at last month's monetary policy statement and signalled a slower pace in future hikes, having increased the official cash rate 100 basis points to 3.5 per cent in four consecutive increases starting in March.