NZIER business opinion survey shows the usual fall in confidence after a Labour-led government takes office, effect of election on actual business activity muted

NZIER business opinion survey shows the usual fall in confidence after a Labour-led government takes office, effect of election on actual business activity muted

By the New Zealand Institute of Economic Research (NZIER)

Businesses more pessimistic after the election

The latest NZIER Quarterly Survey of Business Opinion shows a sharp drop in business confidence following the General Election, with a net 11 percent of businesses expecting economic conditions to deteriorate over the first half of 2018. Business confidence had fallen in the previous quarter ahead of the General Election, and it appears uncertainty over new Government policies have made businesses even more downbeat.

The decline is more modest when it comes to businesses’ own demand. A net 10 percent of businesses reported a lift in own trading activity in the December 2017 quarter, an easing from the net 13 percent in the previous quarter. Previous QSBO surveys have shown business confidence tends to fall after Labour takes office, in contrast to a lift in confidence when National takes office, but the effect on actual activity has been muted. Businesses may be worried about the outlook for the New Zealand economy under the new Labour-led Government, but for now this is not reflected in demand in their own business.

Lower confidence across the sectors

The decline in business confidence was broad-based across the sectors, with retailers and manufacturers particularly downbeat. However, the pessimism was not reflected in activity indicators. Domestic sales remain solid in the retail and manufacturing sector. The building sector also reported solid output and new orders. Across the regions, the pessimism was evident in the urban regions including Auckland, Wellington and Canterbury. In particular, a net 33 percent of Wellington businesses expected a worsening in economic conditions over the coming months. Pessimism in the dairy-intensive regions such as Southland and Taranaki suggest increasingly dry weather conditions in recent months has dampened confidence.

Profitability weak

A worrying development is the continued weakening in profitability, with a net 7 percent of businesses reporting a decline in profitability over the past quarter. Businesses expect further deterioration in the next quarter, in contrast to the trend over the past year where businesses had remained optimistic about a recovery despite weak profitability.

Weaker confidence and profitability is weighing on businesses’ expansion plans, particularly when it comes to business investment. Only a net 2 percent of businesses plan to invest in new buildings, a sharp drop from 18 percent in the previous quarter. Hiring intentions are also lower, despite solid hiring in the past quarter. These developments point to a softening in growth over the coming year.

NZIER quarterly survey of business opinion

Select chart tabs »

The 'NZIER business confidence' chart will be drawn here.
Loading...
NZIER business confidence
Source: NZIER

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

27 Comments

Comment Filter

Highlight new comments in the last hr(s).

NZIER is making a mistake here.......much of the trading activity in the Dec quarter would have been factored in by businesses as either forward works or cyclical spending........

Business confidence is down because of the complete lack of direction being displayed by this rediculous government....business confidence is an overall view and not just related to trading activity.......who the heck wants to work hard and then look down the barrel of a government who wants to destruct assets via redistribution mechanisms?

I agree take away WFF, Superannuation, charge for primary and secondary education, and privatise the health sector to give me a tax cut. I'm sure everything will work out fine.

Well we are doing all those things you talk of so why isn't it fine right now?

It is State interference vs the People that creates all ills! That is why the State's role must be limited at all times!

Yea, Labour has done all that damage in five months. Destroyed the perfect utopia that was National’s nine year creation. Good grief mate, get a grip! Seriously!

Surely you are joking. A "perfect utopia" that was taking us to a very probable crash of our entire market.

Well, obviously he's joking.

"We live in a system of human emotions that masquerades as a science (economics)." Central bankers are deluding themselves if they think they can calibrate and fine-tune human emotions. When the Bullish certainty that "central banks have our backs" erodes, the switch to bearish impulses to sell before everyone else sells will be sudden and irreversible.

http://charleshughsmith.blogspot.co.nz/
Just an opinion , of course, but looks about right to me....

Let us all go and find random, self published authors to support our views.
It's bad enough when people start quoting John Mauldin, but this is just now getting crazy.

Central Bankers don't seek to fine tune emotions, at all.
They seek to moderate the financial environment by using observed (rational) behaviour as the basis. Any action they take is a result of some revealed preference. The objective is to influence rational, not irrational, behaviour.
I agree this is flawed in many ways. However, all you trendy people who advocate it as lunacy often both misunderstand the logic and fail to provide better alternatives.

Economics is a strange thing. Everyone thinks they know best.
It's crazy to think that people don't argue with Doctors, Lawyers or Engineers. Yet, they feel quite comfortable arguing with economists.
The true irony being that the majority of professional economists have undergone substantially more academic and professional training to earn the title, than many of the aforementioned have.

Quite right. And most economists think the same, having gone through the same educational process. Saftey in numbers etc, and those that think the same as everyone else, will be...everyone else. Those that can, do and those that can't teach etc.
Alternative?
Confine Central Banks to their core function - the supply of state currency. The quantity of money is a sufficient regulator of the economy at every level. Forget this tinkering with interest rates, 'inflation' figures and unemployment - or whatever else may be trendy at any given time. Having a read through the other article on this site today re the RBNZ Review is further evidence that 'they don't know what they are doing' to me. Proof? Why are we here, in yet another 'unexpected' pickle, if they do?

"And most economists think the same, having gone through the same educational process."
Same with Doctors, Lawyers, and Engineers.
Funny that the scientific process produces that result among the educated, huh.

"The quantity of money is a sufficient regulator of the economy at every level."
Isn't that exactly what central bankers already do with inflation targeting?

"Why are we here, in yet another 'unexpected' pickle"

What is unexpected about it?
The business and financial cycles are very easy to measure and, to a large extent, forecast. This is the free market in action, long term cyclical behavior. Not at all unexpected.

The current state of asset inflation, too, is not unexpected. You would find it hard to get any economist to admit that that wasn't foreseen.

The task of a central bank is to underpin financial stability in an economy, which requires a fine balance of policy to maintain. Yes, it has unwanted consequences at times, but the objective is to always maximise welfare in the economy.

Yes. And for some time the educated thought the planets revolved around the earth...which of course was flat, not to mention thalidomide cures morning sickness...Conventional Thinking is just that - conventional. We evolve from the unexpected and alternative views.

I'm glad you don't think '08 was unexpected because that puts you in a tiny minority. But that you don't think that 'we have a problem' today put you in the vast majority ( that was the purpose of thought of the link I firstly attached).
Current asset 'inflation' might have been a tool, but what was the intention? Not asset price rises in isolation, but general wage rises across the planet to 'pay off the debt' as had been done after the calamities of two World Wars. It hasn't worked, and it won't! So now what? ( back to that link)

The welfare of any economy can be taken care of by intervention on only a very short-term basis. I understood QE 1 and its intent. But once it didn't work, follow-up measures of a similar nature stood no show of working - and they haven't. Are we still here? Yes. But that is no proof of long-term survival. Once QE1 didn't 'do the trick' - and I'd guess that 'they' threw more than what they thought was the kitchen sink at the problem - it should have been obvious that The System was in strife an needed a reset - it still does.

Anyway, what will be the next key to what's coming? I don't know - yet. But I can tell you what informed me last time - Jerome Kerviel. Not statistics or models or opinions, but fact. And that one happening made me react. When the next Jerome comes along, I hope I see it again, but until then, my view is that we are in trouble, and articles like the one I attached show me that others think similarly.

"We evolve from the unexpected and alternative views."
Like the flat earth theory? Like the lizard people theory?
Seems legit. I can't wait until we prove those two.

"I'm glad you don't think '08 wasn't unexpected because that puts you in a tiny minority."
No I'm not. Everyone with half a brain realised that that was coming. Just they couldn't predict when.
Back to the whole financial/business cycle thing, again.

"Current asset 'inflation' might have been a tool, but what was the intention?"
Asset inflation wasn't a tool. It was a consequence.

"The welfare of any economy can be taken care of by intervention on only a very short-term basis."
Really?
So why did all the central banks implement inflation targeting on the basis that it would stabilise long term inflation?

"Not statistics or models or opinions, but fact."
You don't consider applied statistical analysis as based on fact? Interesting. But it does explain a lot.

Asset price rises may have been a consequence, but if that wasn't 'the tool' what was the purpose? Prices rising.... forever? And then what? There was an intention, in my opinion, to raise prices of asset AND wages. I don't see the purpose otherwise. Debt for debt sake makes no sense - except to suppress The Masses, of course...

Our current policies QE, the whole shooting match, relies on - people believing what they are told and that 'it' is working. The second that either of those falls apart, there's going to be trouble.

Central banks implemented inflation targeting because New Zealand did! But 'why'? Why wasn't it used pre 1997 ( or whatever the date was)? Before that, the amount of cash in the system was controlled through a series of note auctions. It worked well but giving central banks a 'target' made life so much easier than liquidity flows each week. Forget the market deciding interest rate settings, let the Central Banks dictate them via one monthly number it instead! And where has that got us? Mortage rates through the floor and our populations' debt-soaked..... but that's another topic.

And you'll have heard the one about statistical analysis? Garge in, garbage out. In fact, I'd go further. Today we decide what garbage we want out, and then configure the input garbage. Cynical? Yes. But in a World of 'whatever it takes' massaging numbers is the easy bit....

I, and others, said it yesterday.
I'll say it, again.

You don't have any idea what you are talking about.

Maybe not. But at 38 I'd made enough to last 10 lifetimes; was the Director of an International Investment Bank; a member of a Central Bank Consultative Committee - all in the far larger market that New Zealand, all from thinking differently to my peers - I guess I still do! My biggest mistake? Asking myself at that age "Is there more to life than looking at a spreadsheet at the end of the day and seeing if the left column is bigger than the right?" and 'retiring' The answer now is obvious - No !

No offense...
But I get really suspicious when people talk about their credentials after displaying a fundamental misunderstanding of what would be very important things for them to understand in their supposed position.

Boatman is another person notorious for this.

I certainly have no idea how to fix the financial problems of our world but recent history is most certainly telling me that those that are supposed to know have not a clue. This is probably an example of the kettle calling the pot black.

I dont want to come between you two as your much more intelligent then me. But.

"You don't have any idea what you are talking about." "Everyone with half a brain realised that that was coming"

I do think you said he/she has no idea and they dont have a brain. So he/she is just explaining their background. Which is kind of fair given how you spoke to BW.

BW is not like the other people who constantly go on about losers and how great they are, constantly patting them selves on the back. So I think its fair enough.

I particularly like the spreadsheet bit and money and life is to short to be looking at spreadsheets.So brownie points from me for that, life is to short.

I commend your effort bw. Economists and their blind belief in their economic dogma is akin to the church and their belief that the bible is fact/truth.

"We can not solve the problems we have created with the same thinking that created them in the first place." - Albert Einstein

"For one who has perception, a mere sign is enough.
For one who does not heed, a thousand explanations are not enough." - Hajji Bektash Wali, Persian Mystic, 1209-1271

"the illiterate of the future are not those who can't read or write, but those who cannot learn, unlearn, and relearn." - Alvin Toffler

Great, more whimsical quotes.

I'm interested as to what Einstein would say now to anyone contradicting his theory of relativity on the basis of a fundamental misunderstanding of said theory.

Economists aren't against new ideas. Far from it.
As I mentioned in the first post, the problem stems from people thinking they have good ideas without a fundamental basis for developing them.

https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf

For more than three decades, macroeconomics has gone backwards. The
treatment of identification now is no more credible than in the early 1970s
but escapes challenge because it is so much more opaque. Macroeconomic
theorists dismiss mere facts by feigning an obtuse ignorance about such simple
assertions as "tight monetary policy can cause a recession." Their models
attribute fluctuations in aggregate variables to imaginary causal forces that
are not influenced by the action that any person takes. A parallel with string
theory from physics hints at a general failure mode of science that is triggered
when respect for highly regarded leaders evolves into a deference to authority
that displaces objective fact from its position as the ultimate determinant of
scientific truth.

Yes, I read Charles Hugh Smith's article and liked it. We are in a crack up boom I think, bitcoin would be ample evidence. I'm expecting inflation and strikes and 1970s replay as it develops further.

As regards economists the Trump phenenemon is classic Hayek, the experts cannot agree or remedy the problem and so a strong man is found who will Get Things Done. It's not about the Trump, it's about the disorder in society that creates the need for one.

My personal favourite theory about central bankers is that they are all highly capable staff officers without brilliant commanders to provide direction. I think bureaucracies tend to be run by a committee of highly trained staff officers, whether they are governmental or corporate. This has its good and bad sides.

Later Field Marshal Erich Von Manstein (1887-1973), arguably the Wehrmacht's best World War II military strategists who was dismissed from service by the Fuhrer in March 1944 due to frequent clashes with him over military strategy, later articulated Field Marshal Moltke’s model in the following quote:

“There are only four types of officer. First, there are the lazy, stupid ones. Leave them alone, they do no harm…Second, there are the hard- working, intelligent ones. They make excellent staff officers, ensuring that every detail is properly considered. Third, there are the hard- working, stupid ones. These people are a menace and must be fired at once. They create irrelevant work for everybody. Finally, there are the intelligent, lazy ones. They are suited for the highest office.”
http://old-soldier-colonel.blogspot.co.nz/2011/07/field-marshal-moltkes-...

The idea is that the lazy and intelligent officer will choose the most valuable objective that can be achieved with the lowest cost. The problem to me is that great people also make great mistakes too...

Bill Gates said something similar too, along the lines that he preferred brilliant but lazy programmers as they would create excellent software with fewer lines of code.

This is not good news however could be offset by opening up immigration and overseas investment. It may ultimately be the only option for the Govt who will need the tax take in order to realise their pre-election promises.

Admin, Why use this misleading title to the report when there is no mention or indication at all of " Business as usual " in the article body or banner - in fact you open by saying "Businesses more pessimistic after the election" .....the whole article implies that Business is NOT as usual and pessimism is on the rise .... this is a second worrying report after the ANZ business report published lately .... ?? ... spinning bad news in this way could reflect badly on your own credibility as an important reporter !!

Eco Bird, try reading the article carefully before you criticize. It is clearly noted that business activity is carrying on while pessimism is on the rise.

I suggest pessimism is the early warning that activity could begin to wane at which time you then can go bush;-) Then we should all be worried (defcon 1)

An excellent article.

Good Lord – what I actual enjoy is behavioural economics, and that is one of prime reasons for my following and interacting with this site.

This entire discussion is certainly an added bonus I must say - quite spirited.

Certainly was popcorn worthy, however it seems more like one side trolling from a standpoint of poor reasoning, lack of scientific principles and naivety in history. Would you think there would be a benefit to some more studies around the behavioural economics? I think I have the quote for that https://xkcd.com/1942/