New Zealand business confidence slumps to 3-year low in Q2: survey

[WELLINGTON] New Zealand business confidence fell to a three-year low in the second quarter as easing economic growth hit retailers and companies cut investment plans, while more firms expect interest rates to fall further, a private think tank said on Tuesday.

A net 5 per cent of firms expected general business conditions to improve, its lowest since June 2012 and down sharply from 23 per cent in the previous quarter, the New Zealand Institute of Economic Research's quarterly survey of business opinion (QSBO) showed.

The reading points to annual growth remaining below 3 per cent in the next year, the NZIER said, and added that it expects the economy to grow 2.6 per cent in the second quarter, down from 3.5 per cent growth late last year.

A net 25 per cent of financial services businesses expect domestic interest rates to fall over the next 12 months, from 4 per cent of respondents anticipating cuts in the previous quarter.

Most of the responses had been received before the Reserve Bank of New Zealand cut interest rates last month and indicated more easing was on the way. "The RBNZ has indicated that it is focussed on boosting demand and making sure headline inflation moves back towards 2 per cent so in light of that this would give them further course for two more rate cuts," NZIER economist Christina Leung told a briefing, adding there was a risk of further easing beyond that.

The survey does not include the agriculture sector, where sentiment has tumbled because of falling prices for dairy and other commodity products, but sentiment fell among manufacturers in the country's key dairying regions.

On a seasonally adjusted basis, a net 7 per cent of firms expected general conditions to pick up, down from 20 per cent in the previous survey and plumbing its lowest in nearly three years.

Despite softer conditions, the poll's measure of capacity utilisation rose to a record high 93.4 per cent, from 92.3 per cent in April-June, as businesses focus on leaner operations and cut spare capacity.

REUTERS