Business confidence at 17 year low
May 31st, 2005 at 2:31 pm by David FarrarThe National Ban’s monthly business outlook survey for May 2005 is out, and it is not pretty.
Economic growth is now projected to crash to 1%.
A net 57% of companies are expecting business conditions to decline and this is spread over all agencies ranging from -46% in retail to -70% in agriculture.
I’ve graphed the series below. It is not just a 17 year low, but almost an all time low. The post 87 crash period is the only lower time.
May 31st, 2005 at 3:31 pm
And the thing about ’87 is that there was only one way then for the economy to go – up. Right now we have peaked and there is only one way for it to go -down. Accordingly we have a confidence survey like this at the top of a cycle, whereas in’87 we had it at the bottom. And Labour are good economic managers? Humbug.
Vote:May 31st, 2005 at 4:19 pm
Bizarrely the graph goes up and down like a yo yo with the nadir every march except mar99 ???
Were there tax cuts that year . This really is no better than reading tea leaves. I mean there have been more pessimists than optimists EVERY qtr since 02 and yet we have had fantastic sustained growth.
According to the graph the years from 92 to 95 were amoung the wonderful years. I have never seen such garbage. The NB must be were the discredited economists from the Treasury- who cant predict the next years growth rate ever- end up
Plus this nonsense from the end of the herald article.
“Among the casualties of the battle on inflation were the dollar, export performance and the cost of capital – which had risen “until finally business confidence was crushed”.
The value of the dollar – against the US$- has risen because George Bush has cut taxes and borrowed to fund increased spending. Vitually every currency has risen against the dollar , unless they were pegged.
Vote:May 31st, 2005 at 4:34 pm
So what does this mean? Business confidence was declining as the sharemarket rose strongly over the last few years. Maybe the market was reflecting the true confidence rather than questioning a few people with a particularly negative viewpoint. Maybe their staff knew more than they did (as can often happen in management!)or maybe it is their Kiwi management attitude. Perhaps if those questioned took a more positive position during the bad times (which are cyclical) our businesses might perform better. All very confusing really hence the value of the data needs to be questioned.
Vote:May 31st, 2005 at 4:41 pm
So what does this mean? Business confidence was declining as the sharemarket rose strongly over the last few years. Maybe the market was reflecting the true confidence rather than questioning a few people with a particularly negative viewpoint. Maybe their staff knew more than they did (as can often happen in management!)or maybe it is their Kiwi management attitude. Perhaps if those questioned took a more positive position during the bad times (which are cyclical) our businesses might perform better. All very confusing really hence the value of the data needs to be questioned.
Vote:May 31st, 2005 at 4:52 pm
Business confidence is NOT just the opinion of a few middle managers. It is the accumulated opinion of employers, and one inference you can take from it is future employment opportunities. Businesses that are not optimistic about future prospects are not going to be too eager to hire new employees.
Business confidence is an important economic indicator so stop spreading your ignorance.
Vote:May 31st, 2005 at 4:54 pm
Those tax cuts could be well timed and a much needed bost under national. Looks like a mild recession is coming, quick call the election now.
Vote:May 31st, 2005 at 5:03 pm
Kimble,
Vote:My comments did not reflect ignorance but as a business person I find that these surveys grate against my entrepreneurial spirit. You correlate the data with employment and yet as confidence declined, unemployment dropped to very low levels. I think the ignorance comes from reading too much into this data, particularly in isolation. As for my own business confidence, I will now be looking for countercyclical opportunities while all those with a negative attitude batten down the hatches. Bring it on.
May 31st, 2005 at 5:57 pm
You want to be a contrarian, fine, what market signals are you going to look for?
These surveys arent there to predict the future, nor to tell you how, as a businessman, you should feel.
Vote:May 31st, 2005 at 6:13 pm
(Tongue firmly in cheek) Maybe they’ve been looking at the polls and are worried about a change in government after the election…
Vote:May 31st, 2005 at 9:29 pm
Own goal tephen perhaps you are right the business sector thinks there might be a change of Government after the election.
Vote:May 31st, 2005 at 9:48 pm
With a Budget like the last one not turning out the way it was intended, it would seem that Labours election plan will be back on the drawing board.
Vote:After all if the economy is going to have a down turn voters really dont have a choice.
Do they want a History Teacher to run the ecomomy with unionist as advisors in caucas or do New Zealanders want a former Governor of the Reserve Bank to be Prime Minister and a Merchant Banker with a rags to riches past to run the economy.
Easy Choice
June 1st, 2005 at 1:39 pm
By the terms of your graph (and the release itself) it’s not a 17-year low, but a 7-year low. It was also pulled down by agriculture and manufacturing, which are facing very special problems. Other industries weren’t nearly as bleak.
Vote:June 1st, 2005 at 8:47 pm
But seriously, how confidently do we rate business confidence?
A similar low in Arpil ’00 – and then 5 boom years. Just goes to show how good businesses and the market are at predictions eh.
However, after 5 good years I would suggest it is natural (and a safe bet) to predict a decline.
Although, maybe the market is predicting a National return (because they are polling so strong) and thus the decline? Just a thought
Vote: