Economy

Business confidence keeps dropping

Business confidence continues to bleed away, falling to its lowest level in more than a decade.

The ANZ Business Outlook for August shows a net 54 percent of businesses expect conditions to deteriorate in the year ahead, from 52 percent last month.

It is the lowest headline reading in 11 years.

Individual businesses were more negative about their own outlook with a net 2 percent pessimism level, an 11-year low, with profit expectations and investment intentions weakening.

"What is emerging in the survey now is weakness in key inflation indicators. Declining inflation expectations were cited as a reason for the large official cash rate (OCR) cut last month," ANZ's chief economist Sharon Zollner said.

"The Reserve Bank will be disappointed that its unexpectedly large 50 basis point cut in the official cash rate last month does not appear to have had much impact on business' sentiment or investment and employment intentions."

She said the economy had positives, such as strong commodity prices, lower interest rates, and population growth.

"But the prolonged lack of confidence is starting to feed its way through the economy and is threatening the tight labour market," Zollner said.

The survey's indicators pointed to firms shedding staff, and a fall off in spending on new houses and offices.

The Reserve Bank of NZ held its cash rate unchanged at a record low 1 percent last week, but it widely expected to cut the rate by at least another quarter-percentage point in November in an attempt to bolster demand and activity.

This article was originally published on RNZ and re-published with permission.

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