ANALYSIS: New Zealand Biz Confidence Negative; Construction Up

--ANZ Survey Shows Confidence Lowest Since September 2015

By Sophia Rodrigues

     SYDNEY (MNI)-  - Confidence among New Zealand firms slipped into negative

territory in October for the first time since September 2015, reflecting the

uncertainty of businesses about the new government.

     Most of the survey responses were received in the first half of the month,

before the new government was announced, so the survey outcome is more a

reflection about the uncertainty about the outcome, rather than the outcome

itself.

     It's unclear if the responses would be different if the outcome itself had

been known for the full survey period.  This will only be known in the November

survey.

     The October survey, published by ANZ on Tuesday, showed business confidence

fell over 10 points to -10.1 from zero in September. The activity outlook,

however, fell only slightly.

     A bright spot in the survey was the rebound in both commercial and

residential construction, though both series have been volatile in recent

months.

     Export intentions eased in the October survey but the New Zealand dollar

has weakened in recent weeks, so there is a possibility of a rebound next month.

     One worry was the fall in the expectation for inflation in one year, though

at 1.93% it remained close to the mid-point of the Reserve Bank of New Zealand's

target band.

     Another area of watch, according to ANZ chief economist Cameron Bagrie, is

the composite growth indicator.

     "Our composite growth indicator is still flagging the potential for solid

growth of around 4%, largely because a softening in business indicators is being

offset by higher consumer confidence. However, we focus on the change in this

indicator as well as the level," Bagrie said.

     "This indicator has softened from 4.9% to 3.9% in the last three months;

that's a material shift and warrants further monitoring," he wrote in a note.

     Overall, the survey results suggest the Reserve Bank of New Zealand will

make no change to its monetary policy outlook at the Official Cash Rate decision

on November 9, though there is some possibility that growth and inflation

numbers could be downgraded slightly.

     Below are details from the survey: 

                          October  September

--------------------------------------------

Business Confidence         -10.1        0.0

Activity Outlook             22.2       29.6

Exports                      20.0       24.5

Investment Intention         12.3       13.2

Employment Intention         14.2       15.1

Interest rates               41.0       41.6

Pricing Intention            20.2       21.1

Inflation Expectation       1.93%      1.98%

Ease of Credit              -30.7      -26.2

Residential Construction     31.3       17.6

Commercial Construction      42.8       17.7

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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