New Zealand business confidence dipped in October, while remaining at an elevated level, as firms started to face slightly tighter credit conditions in an environment where low interest rates have made money cheap for an extended period.
A net 24.5% of firms were optimistic about the general economic outlook, down from 27.9% in September, while a net 38.4% see their own activity expanding, down from 42.4%, the Australia and New Zealand Bank Business Outlook shows, Scoop reported.
A net 18.9% of firms found it tougher to access credit, up from 9.7% in September, with agriculture and construction finding it the hardest.
“A tightening in credit may dampen activity in the near term, but it’s arguably in New Zealand’s medium-term economic interests,” ANZ Bank New Zealand chief economist Cameron Bagrie said in a note.
“New Zealand is notorious for bingeing at the top of the cycle (rapidly accumulating leverage, pushing valuations to extremes, blowing out the currency account deficit), which ultimately requires a visit from the Grim Reaper as excesses are purged.”
New Zealand’s economy has been beating expectations as strong tourism and record migration underpin consumer spending, while a housing shortage and the Canterbury rebuild has supported building activity.
Capacity constraints in the building sector have been pushing up construction costs, sinking several property developments in Auckland, and have prompted banks to be more circumspect in their lending to Auckland apartment projects.
The ANZ survey shows the construction sector is in good heart, with a net 37.5% of firms expecting commercial work to expand and 44.4% seeing more residential buildings.
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