- Cameron Bagrie, NZ Bank Chief Economist
New Zealand business confidence plunged this month, with the annual Budget release being the major reason behind the worsening mood. A net 15.7% of respondents in the ANZ monthly survey anticipated business conditions to ameliorate over the next 12 months, compared with a net 30.2%, who had forecast an improvement in the prior survey conducted in April. Employment intentions, profit outlooks, and investment expectations each declined in May, along with export intentions. Yet, business continues to be supported by strong residential construction activity, solid consumer demand with a growing population and low inflation, and strong manufacturing activity. In addition to that, low interest rates are helping to support business activity. While the Reserve Bank of New Zealand has said that it plans to keep rates on hold this year, there is an increasing number of economists, who predict the central bank to cut.
Separately, new building approvals fell in April following a strong surge in March, with the broader trend falling, indicating that the construction boom may be heading to an end. The number of new residential building consents issued by council declined 1.7% last month from March, according to Statistics New Zealand, totalling $1.2 billion of work. This followed a revised 10% rise in approvals in March.
© Dukascopy Bank SA