New Zealand’s business sentiment falls into negative territory in October

New Zealand’s business sentiment dropped to negative territory in October after the weaker outcome seen in September. The business confidence index came in at -10.1. Firms’ confidence about their own activity outlook also dropped to 22.2. October’s result is the lowest since September 2015. The result is most likely a reflection of the inconclusive outcome of the General Election, with responses collected before the new government formed, noted Westpac in a research report. In all the confidence in the survey continues to be in line with the view that the New Zealand economy continues to cool.

Construction intentions rebounded from a temporary low in residential and commercial spaces, which is in line with the positive outcome in consents data from August. Construction activity appears to be facing headwinds in the way of tighter credit conditions and access to skilled labor, stated Westpac. Firms, in this survey, have reported difficulty in accessing credit, while pricing intentions in the construction sector continued to increase.

“We remain of the view that the issues facing the construction sector will see construction activity rising only slowly over the coming year”, added Westpac.

Capacity utilization continued to drop. Inflation expectations also fell noticeably by 5 basis points to 1.93 percent, supported by subdued pricing intentions. Another notable aspect was the rising difficulty in the access to credit across the wider economy, aiding in affirming that credit conditions in New Zealand are tight currently.

“This survey supports our slightly softer view on the economic outlook. The own activity results supports a GDP forecast of 2.5-3 percent, with economic growth for the year likely to ebb on the softer side of the range”, stated Westpac.

At 12:00 GMT the FxWirePro's Hourly Strength Index of New Zealand Dollar was neutral at -5.49008, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -6.42884. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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