Business belief hits GFC levels

There’s ‘‘nothing good to say’’ about business confidence, economists at New Zealand’s biggest bank say.

ANZ has released its latest New Zealand Business Outlook, which shows headline business confidence fell eight points to negative 52 per cent in August.

That is the lowest since April 2008.

Firms’ view of their own activity fell six points, the lowest level since 2009.

Retail had the strongest confidence and agriculture the weakest.

‘‘The agricultural sector is expecting increased production, but terrible margins due to higher costs,’’ wrote chief economist Sharon Zollner.

The construction sector had the weakest employment intentions.

‘‘The outlook for the economy appears to be deteriorating further, with firms extremely downbeat despite easier monetary conditions, fairly robust commodity prices, and positive population growth. Whatever the cause, the risk is rising that it becomes self-fulfilling.’’

Meanwhile, an update of NZIER’S Quarterly Predictions showed economic growth was expected to slow in the coming years.

‘‘We now expect annual GDP growth to average around 2.2 over the next five years.

‘‘With the trade war between the US and China showing little sign of being resolved anytime soon, this is likely to dampen demand for New Zealand exports from 2020,’’ principal economist Christina Leung said.

She said businesses were struggling

Businesses were struggling to pass on rising costs by increasing prices and were reporting softening in demand.

to pass on rising costs by increasing prices and were reporting softening in demand.

‘‘Households have become more cautious about discretionary spending. However, there are signs housing demand is picking up, supported by the removal of the potential for a capital gains tax, the relaxation of loan-to-value (LVR) restrictions at the beginning of this year and lower mortgage rates.’’

Research house Fitch said it expected the New Zealand dollar to drop in value against the US dollar in the short-term but would pick up over the long term and was currently undervalued.

"We expect New Zealand’s economic growth to outperform that of the US over the next 24 months, which will put upward pressure on the New Zealand dollar,’’ Fitch said.

‘‘We forecast New Zealand’s GDP for 2020 and 2021 to come in at 2.6 per cent and 2.8 per cent respectively, compared to our forecast of 2 per cent and 1.8 per cent for the US.

‘‘Our pessimistic view regarding the US economy is due to our expectations for China-us trade tensions to escalate further, with the prospects of a deal before the 2020 US presidential election looking increasingly unlikely.’’