- Cameron Bagrie, ANZ Bank chief economist
Morale among New Zealand businesses unexpectedly dropped to the lowest level in six years in July, with agriculture being the most downbeat sector. The July release of ANZ Business Outlook revealed that a net 15% of firms were pessimistic about the general economy over the year ahead, compared with a net 2.3% in the prior month. A net 19% of those surveyed expected their own businesses to grow over the course of next 12 months, down from 2.6% in June. Confidence was weakest among farmers and the agriculture sector as a whole, with a net 45.4% pessimistic, with negative readings for profits, employment and investment intentions. Confidence in the agriculture sector has been severely undermined by the sharp decline in dairy prices. Whole-milk powder prices have plunged 63% since February 2014, hitting the agriculture-dependent country hard. The RBNZ flagged the dairy sector as a major risk to financial stability. Meanwhile, firms in the construction sector grew sharply more downbeat, with a net 28.6% pessimistic. The services sector and retailers both turned pessimistic this month, at -4.8% and -19% respectively. Some 15.5% of manufacturers were dispirited.
The survey comes after this week's comments by Reserve Bank of New Zealand Governor Graeme Wheeler, when he said further cuts to interest rates were likely this year.
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