NZ business confidence declines in October following tighter credit conditions

Business confidence in New Zealand declined during the month of October, following tighter credit conditions in an environment where low interest rates have made money cheap for an extended period.

A net 24.5 percent of firms were optimistic about the general economic outlook, down from 27.9 percent in September, while a net 38.4 percent see their own activity expanding, down from 42.4 percent, the ANZ Business Outlook shows. A net 18.9 percent of firms found it tougher to access credit, up from 9.7 percent in September, with agriculture and construction finding it the hardest.

The ANZ survey shows the construction sector is in good heart, with a net 37.5 percent of firms expecting commercial work to expand and 44.4 percent seeing more residential building. Hiring intentions came back, with a net 20.7 percent expecting to take on more staff compared to 25.3 percent in September, while investment intentions slipped 1 point to 18.9 percent.

Further, a net 30.3 percent of firms expect to be more profitable in the coming year, down from 34.4 percent a month earlier, and  a net 17.6 percent want to raise prices, up from 16.8 percent in September. Inflation expectations were unchanged at 1.44 percent.

"A tightening in credit may dampen activity in the near term, but it's arguably in New Zealand's medium-term economic interests," said Cameron Bagrie, New Zealand Chief Economist, ANZ Bank.