New Zealand: Business confidence at over three-year high in December
December 18, 2020
The ANZ bank business outlook indicator rose again in December, recording the highest print since September 2017. As a consequence, a net 9.4% of firms reported that they expect general business conditions to improve in the year ahead, from a net 6.9% of firms reporting that they expected general business conditions to worsen in the year ahead in November. Therefore, the headline reading jumped above the net-0% threshold that separates pessimism from optimism among businesses.
December’s result reflected stronger export and employment intentions as well as a higher capacity utilization and rising investment intentions and profit expectations.
Meanwhile, firms’ outlooks regarding their own activity—a metric which has a stronger correlation to GDP growth—surged from November’s net 9.1% to a net 21.7% in December—the strongest reading since March 2018.
Commenting on the release, Sharon Zollner, ANZ chief economist, stated:
“The New Zealand economy is showing impressive resilience. After a 14% bounceback in the September quarter, the economy is the same size it was pre-COVID. It’s not the same shape though. Behind the numbers lie some real stresses and strains, in both overheated sectors like construction, and chilled ones like tourism. We expect a technical recession in Q4 and Q1 as the policy-fuelled bounce fades and the tourism hole hurts, though the imminent prospect of travel bubbles is very encouraging. But as regards the recent growth bounce, increasing debt, whether public through fiscal policy, or private sector debt, is not a sustainable source of growth. In particular, rapidly increasing house prices in this environment is outright worrying. If inflation pressures continue to rise rapidly (albeit from low levels), that will bring into question the common assumption that mortgage rates will remain rock-bottom for many years to come.”