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Tight credit hurts business confidence

NZ Newswire logoNZ Newswire 30/11/2016 Edwin Mitson

New Zealand business confidence fell in November as pessimistic manufacturers offset upbeat farmers, construction firms and service companies.

A net 20.5 per cent of firms were optimistic about the general outlook for the economy in November, down from 24.5 per cent of firms a month earlier, the ANZ Business Outlook shows. A net 37.6 per cent saw their own activity expanding, just down from 38.4 per cent in October.

The second drop in confidence in as many months wasn't enough to suggest the economy is on anything but an upbeat trend, given the stronger own-activity measure, strong employment intentions and the outlook for profits, with 29 per cent of firms surveyed expecting to increase earnings in the year ahead, just below October's reading of 30 per cent. Those planning to increase prices rose to a net 20.8 per cent from 17.6 per cent, while inflation expectations rose to 1.49 per cent from 1.44 per cent.

All sectors reported that it was getting more difficult to get credit, with 22 per cent of respondents reporting "sand in the gears." It's the highest figure since the survey started asking about credit in 2009.

"It is midnight at the beach bar and the RBNZ is playing bouncer (via LVR) and banks the responsible bartenders," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "Drinks are now being rationed and that's a good thing. New Zealand's history is littered with boom-bust cycles, and credit sits at the centre of such dynamics."

Residential and commercial building intentions eased lower, although the construction sector led employment intentions. More firms expect the unemployment rate to fall further.

Bagrie said the economy was still riding a wave of "historically low interest rates, solid confidence, improving commodity prices and an exchange rate that's taken a quick dip."

Most of the survey responses were received before the Kaikoura earthquake on Nov 14.


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