"It's important to remember that this decline in confidence has been desired - and at least partly engineered - by the Reserve Bank"
-Cameron Bagrie, chief economist at ANZ Bank New Zealand
Business confidence in New Zealand dropped sharply for the second consecutive month in June amid rising interest rates, the latest data from ANZ showed. The strong New Zealand Dollar, lower forestry and diary prices, and a levelling in the real estate market have also undermined business morale. The gauge fell to 42.8 in June down from 53.5 seen in the previous month. Following the release of disappointing data, the kiwi weakened versus the U.S. Dollar, but remained close to a 34-month high as weak U.S. data continued to weigh on the greenback. NZD/USD dropped to 0.8732 during late Asian session, the lowest level since June 25.
A net 43% of the ANZ Bank Business Outlook survey participants expect general business conditions to ameliorate over the next 12 months, compared to 54% in May's survey. 45.8% anticipated their own business activity to improve in the year ahead, down from 51.0% seen in April. 24% of firms plan to hire more workers in the next year, down from the peak of 32% in February but above the 10-year average of 5%. Moreover, export intentions declined to the lowest in a year, whereas expected profitability fell for four straight months. Inflation expectations and pricing intentions dropped slightly; however, in the construction sector a net 54% of companies still expect price rises.
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