New Zealand business confidence measures are expected to ease in coming quarters as the realities of a bleak global growth picture hit home, ANZ-National Bank economist Mark Smith says.
The New Zealand Institute of Economic Research Quarterly Survey of Business Opinion (QSBO) showed headline business confidence and expected domestic trading activity holding up much better than expected in the face of the recent global turmoil.
Mr Smith said that might be partly attributable to the timing of the survey before September 15, missing the downbeat Monetary Policy Statement by the Reserve Bank and an increasingly bleak spate of global headlines.
"However, the New Zealand economy has positive offsetting factors that will help us ride through the storm.
"Christchurch's reconstruction will keep us busy for years. The rural sector continues to outperform and New Zealand commodity prices are so far holding up better than hard commodities."
Financial conditions were providing considerable support, especially with the fall in value of the New Zealand dollar, and the Rugby World Cup was providing a feel-good factor.
On the other side, there were credit downgrades, a fiscal straitjacket, the spectre of higher bank funding costs feeding into borrowing rates and weaker growth in trading partners.
There was a rough road ahead, Mr Smith said.
BNZ economist Stephen Toplis said that despite carnage elsewhere in the world, New Zealand businesses remained relatively upbeat.
"'She'll be right mate' seems to be the attitude being adopted by corporate New Zealand."
On the same day that JPMorgan reported the global performance in manufacturing index (PMI) dropped to 49.3 points for the first time since June 2009, New Zealand businesses reiterated their belief the economy here was still on the road to expansion, he said.
If the QSBO was taken at face value, it suggested that projections for the economy to have grown 1.1% in the three months ending September could have been too optimistic. But it was consistent with the belief that economic growth would be about 3% by the end of the year.
Mr Toplis said it was hard to know how recent events had affected confidence.
NZIER quickly pointed out the survey was taken before the recent fall in global expectations and the New Zealand credit-rating downgrades.
But it was equally true the survey was conducted before the dollar plummeted to US75c, some US13c below its peak.
"Surely this must be confidence-boosting to exporters and concerning on the inflation front, especially for importers."
Also, the "bombshell" of Dan Carter being out of action for the remainder of the Rugby World Cup would have an effect, he said. Headline business confidence was often pushed around by factors that had very little bearing on the likely outcomes for business activity.
With that in mind, it was remarkable that headline confidence was as high as it was, given the barrage of bad news New Zealand had been subjected to, Mr Toplis said.
More importantly, despite the headline-grabbing news, it was heartening that the "own activity" measure of confidence still saw cause for optimism, he said.
