WELLINGTON: New Zealand business confidence hit a fresh six-year low in August, led by agriculture. A net 29.1% of respondents in the ANZ Business Outlook survey expected business conditions to worsen over the next 12 months, compared with a net 15.3% who had expected it to worsen in the July survey.
“Confidence may not be the economic engine that drives growth but it’s critical for keeping the economic wheels turning,” said ANZ Bank Chief Economist Cameron Bagrie. “Lacking confidence, firms don’t invest, or take a punt on that new employee. Activity can grind to a halt. That’s a growing risk,” he said.
Net confidence is defined as the percentage of optimists minus the percentage of pessimists. A net 12.2% expected their own business activity to improve in the coming year versus 19.0% in the prior survey. Mr. Bagrie notes agriculture remains “down for the count” given a low dairy payout for the current season.
Confidence in the agriculture sector has been hard hit by the drop in dairy prices. Whole-milk powder prices are down more than 60% since February 2014, hitting the agriculture-dependent country hard. The central bank has flagged the dairy sector as a major risk to financial stability. “Cash-flow pressures are intense and rural regions will feel the initial squeeze,” he added.
