New Zealand: Business confidence plummets in the wake of the Christchurch earthquake
March 31, 2011
Business confidence plummeted in March. According to the business confidence index published by the National Bank of New Zealand (NBNZ), a net 8.7% of respondents to the survey expect worse business conditions over the next 12 months, which was down 43.2 points over the February survey, when a net 34.5% of businesses expected better times for the economy in the year ahead. The March print ends the upward trend observed in business confidence since September last year and, in fact, represents the weakest business sentiment since April 2009. According to the NBNZ, the fall marked the second largest monthly decline since records of the survey began. The decline reflects the impact of the devastating earthquake that hit Christchurch in February. With the March decline, the index fell below the 0-point threshold, which indicates that pessimistic respondents outnumber optimists. The deterioration in business sentiment was broad-based, in particular businesses' perception towards their own activity expectations over the year ahead deteriorated. Consequently, firms' profit expectations fell notably compared to the previous survey. Moreover, business investment expectations dropped over the previous month, although the magnitude of the fall did not push the index into the red. A net 5.8% of firms expect to invest in buildings, plants and machinery in the following year, which was down from 9.0% of firms observed in February.
Author: Ricardo Aceves, Senior Economist