NZ business confidence plunged in November 2017 – Westpac

New Zealand business confidence plunged in November (-39.9) and firms’ own activity outlook also took a dive falling to levels not seen since 2009 near the end of the Global Financial Crisis, points out Shyamal Maharaj, Research Analyst at Westpac.

Key Quotes

“The drop in confidence probably partly reflects the general softening we have seen across a number of areas in the economy recently. But we suspect it is also in part a knee-jerk reaction to the change in government. We were expecting a drop in confidence, but the extent of the fall surprised us.”

“While this survey result may not accurately reflect the state of the economy at present, it does serve to illustrate an important point we have been making. In our recent Quarterly Economic Overview, we forecast a hiatus of business investment in 2018, which was a key reason for lowering our forecast of economic growth in 2018. We stand in stark contrast to the RBNZ on this front, as the RBNZ is anticipating strong growth next year. Today’s plunge in business confidence supports the idea that business investment may stall.”

“Construction intentions fell, which reinforced recent data on consents and highlights those capacity constraints the sector and economy is facing.  Ease of credit and access to labour worsened across the board. Unemployment expectations rose as well, driven by sentiment in the retail sector.”

“Inflation expectations rose to 2.3% from 1.9% (October), perhaps reflecting business opinion on proposed changes to the Reserve Bank Act as much as observations on actual prices.”

“The NZD/USD fell by 30 points and swaps fell by 1 basis point in reaction to the survey.”