All eyes on business confidence index

THE ANZ business confidence index and the Reserve Bank’s official cash rate announcement will dominate local economic news this week.

The latest business confidence results are released at 1pm tomorrow, and markets will be looking for any sign of a rebound, Craigs Investment Partners broker Chris Timms says.

Business confidence fell for the third consecutive month in May, while the own activity measure was also down.

Headline confidence was the lowest since January and well down on the longterm average. The own activity index — which correlated more closely with economic growth — fell to the lowest since November, despite remaining in positive territory.

Construction activity indicators would be closely watched given the sector had looked weak for the past two months.

The own activity measure for construction remained downbeat in May, capacity utilisation dropped sharply and employment intentions for construction fell to the lowest since 2009, Mr Timms said.

National Party economic and regional development spokesman Paul Goldsmith said yesterday that the Government’s dismissal of ‘‘real concerns’’ from businesses would only make business confidence fall faster.

Survey after survey was showing business confidence tanking.

‘‘Finance Minister Grant Robertson’s claim it is just an issue of perception [is] wrong. It’s a justified response to a lack of leadership, bad decisions and poor policy, and the Government must shoulder responsibility.’’

On TVNZ’s Q+A on Sunday, Auckland Chamber of Commerce chief executive Michael Barnett said businesses were genuinely concerned.

Mr Barnett claimed the Government’s attitude to business was dismissive and if things continued the way they were, economic activity would slow.

Mr Goldsmith said the warn ing was concerning and the Government needed to listen and act, rather than continuing to disparage and dismiss those who disagreed with it.

‘‘The fact is the Government is slowing our economy down and New Zealanders will pay the price.’’

The Reserve Bank is widely expected to keep the official cash rate unchanged at 1.75% on Thursday.

Mr Timms said it was unlikely there would be any new information to analyse because the next Monetary Policy Statement was not due until August.

Overseas, reaction from Turkey’s election would be the focus for European and American markets.

The Turkish economy was a major issue for those involved in the political campaign. Inflation had risen to more than 12%, the currency had fallen sharply in recent months and the Turkish central bank had been forced to raise its key policy rate to 17.75%, he said.

Turkey was not part of the European Union. It became eligible for membership in 1997 and accession talks began in 2005, but virtually no progress had been made in ensuing years.

Trade tensions would continue to dominate global headlines and markets are on edge as tensions grew over the dispute between the US and China, Mr Timms said.

The first US tariffs against Chinese imports were due to be enacted in two stages from July 6, less than two weeks away.

‘‘If any agreement is to be reached ahead of this, both countries are running out of negotiating time.’’

US President Donald Trump also threatened on Friday to slap a 20% tariff on European cars imported into the US, hitting share prices for European vehicle manufacturers such as BMW and Volkswagen.

Policymakers in the EU would have plenty to discuss at their twoday summit on Thursday and Friday. Trade is sure to feature high on the agenda, along with migration issues and Brexit, Mr Timms said.

❛ The fact is the Government is slowing our economy down and New Zealanders will pay the price

National’s Paul Goldsmith