Business confidence is continuing to slip, the National Bank says, and is now down 34 points from the peak reached six months ago in February.
The National Bank's latest monthly business confidence survey shows a net 16% of respondents expect general business conditions to improve in 12 month’s time.That's down 12 points on last month.
"We’ve referred to the last few months as seeing momentum wane from a gallop to a canter to a trot," National Bank chief economist Cameron Bagrie said.
"The risk is building that we take a further step down to a mere walk."
Bagrie noted that firms’ own activity expectations continued to soften. A net 26% of businesses expect better times for their own firm over the year ahead, down 6 points from July.
"This takes firms’ activity expectations to broadly “average” levels, which a glasshalf full description would describe as still respectable. But a glass half-empty view would take it as somewhat disconcerting to see firms’ own activity expectations recede (or level out) so early in the recovery process."
One area to buck the weakening trend was export intentions, with a net 31% of businesses expecting to be exporting more over the year ahead.
Meanwhile, Bagrie noted that pricing intentions barely budged. A net 32% of businesses expect to be raising prices over the year ahead. This meant that at current levels, pricing intentions were consistent with 4% inflation, a relatively demure picture, Bagrie said, given the anticipated boost to inflation from the October 1 GST hike and other one-offs in the second half-year.
"We have an economy that appears to be settling into a moderate expansion phase, albeit with clear risks," said Bagrie. "There’s growth all right, but it doesn’t feel like it for a lot of folks. Such is the base-effect reality of recovering from lows."
"On top of that we have an economy embarking in deep-rooted structural change that involves massive portfolio and resource reallocation as the economy shifts from being spending centric to one of being more earnings (i.e. export) driven. Resources (labour and capital) take time to mobilise. The term 'this time is different' insofar as describing recoveries is typically a grave-yard for economists. But things are certainly pointed that way at present."
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