25 Jul 2014

Confidence eases, firms still optimistic

7:29 pm on 25 July 2014

Firms remain buoyant about the economy's prospects, despite higher interest rates and a sluggish global recovery.

A net 40 percent of companies surveyed expect economic conditions to improve in the coming year, according to the latest ANZ Bank confidence survey.

The survey shows confidence has waned from sky-high levels because of rising interest rates, lower commodity prices, the persistently high dollar and a slowing housing market.

But ANZ chief economist Cameron Bagrie said on Friday that sentiment was still consistent with solid economic growth.

"At the start of this year we were running around I guess, four percent growth. If I took a stab at where the New Zealand economy sits in Q3 this year, I think we're probably running something marginally in excess of about 3 percent. So 3 percent - that's still very respectable, healthy.

The bank's economists alo note that firms remain upbeat about their own prospects and future profits - if not as optimistic as a few months ago - while more intend to hire and invest than don't.

Inflation intentions edged up, with a net 26 percent of firms expecting to increase prices, while inflation expectations rose to 2.6 percent.

Meanwhile, the International Monetary Fund has cut its global growth forecast, and warned conflict in the Middle East and Ukraine could undermine activity further.

Analysts say New Zealand wouldn't be immune if that comes to pass, but solid demand from China for commodities, plus a floating currency and the ability to cut interest rates, would help the country cope with it.