Business Confidence down down down …
April 27th, 2005 at 11:47 am by David FarrarI’ve been tracking the National Bank business confidence survey for years, and even have the data back to 1988. The fall to -48% is the 4th lowest in history. It was at negative 67% to 69% in March and April 1988, and at -56% in June 2000. The other 190 or so months have all been higher with 68 months with net negative confidence and 120 months with a net positive outlook.
The NZ Herald quotes the National Bank Chief Economist as predicting economic growth may drop to around 1% only. He says “Costs are rising for many firms, with higher oil prices and rising wage demands, which makes them more nervous”.
However the most disturbing element is that firms are expecting prices to go up, yet profits fall, “increasing the risk of a worst-of-both-worlds outcome of weak growth but high inflation”.
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April 27th, 2005 at 11:56 am
How good an indicator is this of the future economic situation in NZ? Are we good at explaining our feelings? (Is perceived confidence the same as reality?) Are we measuring the right things? How much do these polls’ outcomes affect the economic situation? (I.e. does negativity feed negativity?)
I don’t have the answers but I do have some nagging little suspicions about the non-sampling errors inherant in this survey.
Vote:April 27th, 2005 at 12:16 pm
Rachel – you are quite right that this is just a survey/poll and people do sometimes react on perception and emotion.
However the people surveyed are those who make decisions for their businesses on whether to hire more staff, invest in plant etc. so the survey can be a self-fulfilling prophecy. If confidence does stay negative, it does tend to impact economic growth significantly.
Vote:April 27th, 2005 at 2:29 pm
Rachel -
I’d also note that it seems the most pessimism is coming from retail – not exactly a sector where thin-skinned hysterics prosper, but enormously sensitive to interest rate and wage claim hikes. Many retailers also put a lot of time, effort and money into getting a clear picture of grass-roots economic activity – when real people are buying and when they’re just window shopping.
Sure, take this with a grain of salt (and a whole bottle of tequila) but I’d not dismiss it out of hand – though I’m sure Cullen and Co. will do their best.
Vote:April 27th, 2005 at 4:00 pm
Business confidence and housing starts are the two critical leading indicators for alterations in economic activity. Sometimes the confidence surveys are used by business to send government a cautionary message, but this fall is too steep to be merely signaling. I’ve been selling NZ dollar assets for a while now in preference of US instruments. I think we’ve got a nasty little recession coming soon, but with inflation and wage demands running pretty hot there’s no room for the reserve bank to cut interest rates to boost activity. Nope, welcome to New Zealand post Muldoon. Housing bubble heats up wage inflation, leading to high interest rates, reduced investment and consumption as households pull their heads in, hello recession.
Shouldn’t be too long though, my only wish is that as there must be one, please let it be to the detriment of the Labour government.
I think some of the younger participants in the left leaning blogosphere are about to learn why social democratic governments are always total failures at managing economies. They won’t fuck it up overnight…but they will fuck it up.
Vote:April 30th, 2005 at 7:25 am
I think one more term of leftwing socialism is in store we cant get people out of there hypnotic helen spell in time.
However 3 years from know it will be the end of the left and people will except low tax more self responcable government as the norm only worry is the poor young things currentley being brainwashed.
praise the lord.
Vote:May 1st, 2005 at 8:26 am
Joe Bloggs voter cares about three simple things. Can I walk down the road to the local shop safely; when I get there will I be able to afford to buy milk, bread and rent a DVD; and will the government make sure I can still do this when I retire.
A simplistic view I know, but business confidence has little to do with Joe Bloggs voter, so I can understand why politicians tend not to care to much about statistics of this sort.
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