InvestNow News 18th Oct – Milford – Business confidence in NZ
John Johnston – Investment Director – October 11, 2019
There has been much talk since the formation of the present government in October 2017, of declining levels of business confidence in New Zealand.
The most widely quoted measure of business confidence in New Zealand is the ANZ New Zealand Business Outlook, published monthly. This survey samples 300-400 respondents each month, and provides two key outputs: 1) businesses’ expectations of general business conditions in 12 months time – a “business confidence index”; and 2) businesses’ expectations of their own activity in 12 months time. Both are reported as a net score of the proportion of those answering “increased” less those answering “decreased”.
Both confidence measures have been falling in the past two years, leading to media speculation as to whether an economic slowdown is coming in New Zealand, and whether more trouble could be in the outlook in terms of a recession.
At Milford, we have insight into a wide range of businesses working across most sectors of the New Zealand economy. And we are already seeing the signs of a broad slowing in the rate of activity growth.
However, our insights into companies in key cyclical sectors of the NZ economy suggest that demand and activity is still healthy and a slowdown could well be a gradual one, with levels of economic activity still remaining mostly healthy. In particular, we have recently been seeing:
- Construction activity remains at an elevated level, where it has been for the past three years. In most regions, activity is steady rather than falling;