Economic Note (New Zealand) NZ
Key Points
The NBNZ business confidence index slipped back slightly in August, with a net +20% of respondents now expecting
conditions to improve over the next twelve months, down from a net +24% in July. This is the sixth consecutive monthly
decline from the recent peak of +68% recorded in February.
Despite the decline in business confidence, respondents' expectations for their own businesses edged up one percentage
point to +39% from that recorded last month. Firms' expectations of their own investment intentions eased back,
profitability expectations remained flat, while capacity utilisation moved up. On of the external front, export
intentions continued to build momentum with manufacturers' export expectations at close to six-year highs. Respondents'
expectations for interest rate rises also increased sharply, with a net +60% now expecting an increase over the year
ahead.
On the inflation front, pricing intentions were reasonably stable, with a net 12% of respondents intending to raise
prices, while annual inflation expectations edged up to 1.9%.
National Bank Business Aug-99 Jul-99 Jun-99 Outlook Survey
Business Confidence +20 +24 +29
Activity Outlook +39 +38 +38
Exports +45 +40 +38
Investment +15 +17 +18
Capacity Utilisation +30 +24 +27
Profits +22 +22 +24
Pricing Intentions +12 +11 +11
Inflation Expectations 1.9 1.8 1.8
Commentary
The modest easing in sentiment for the month appears to reflect the sharp increase in the number of respondents
expecting a rise in interest rates later this year. However, despite the slippage in confidence, the less volatile
respondents' assessment of their own activity prospects has remained reasonably stable. Perhaps the most significant
feature of these data has been the on-going improvement in export expectations. While these trends have yet to be fully
translated into merchandise trade data, the prospects for improving trading partner growth rates, together with a more
competitive exchange rate, reinforces our expectation for a more balanced activity profile over the year ahead.
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