BNZ, Auckland, December 18, 2018
As one of New Zealand’s largest banks, BNZ is in a unique position to monitor movements in the economy and identify regions and sectors that are outperforming and under-performing.
We believe if you really want to understand how an economy is performing, ask a banker who knows their customer well. In this report, we survey hundreds of our business bankers across the country and ask them a simple question: tell us about your customers?
We don’t ask them to speculate about the economy or what they think is a “good” or “bad” industry. Rather, we want to know how their customers are performing.
We then align their observations to the industry their customer is in and the region where they’re located.
From this we derive a unique measure of business conditions and confidence. It also allows us to explore industry conditions at a much more detailed level than more traditional business surveys.
Solid Business Environment
Overall, the Survey paints a picture of a solid business environment (both now and in the future), albeit one currently marked by a divergence between the agribusiness and non-agribusiness sectors of the economy – with the latter clearly outperforming.
That said, a closer look at conditions by industry and region reveals a more complex story (e.g. several agribusiness industries are also over-represented among our strongly performing customers).
Highlight of the Survey
New Zealand business conditions were positive in Fourth Quarter of 2018.
The index measured +17 (indicating on balance the number of bankers who said that conditions were stronger outweighed those who said it was weaker).
It shows very strong trading conditions (+36) and profitability (+16), while employment conditions were neutral (0).
Conditions were much stronger for non-agribusinesses (+21) than agribusinesses (+4).
All components of the index were stronger for non-agribusinesses, particularly trading conditions (+43 vs. +9) and profitability (+18 vs. +7).
Weak Economic Conditions
Employment conditions were however relatively weak in both business segments, but more so for agribusinesses (-5) than non-agribusinesses (+1). • Overall conditions in New Zealand were also marginally stronger than in Australia.
However, New Zealand trading conditions were much stronger than in Australia. Conversely, New Zealand employment conditions were weaker.
New Zealand business confidence is also positive (+4). Again, confidence levels for non-agribusinesses (+13) are much stronger than agribusinesses (-30).
Confidence in New Zealand is also in line with levels reported in Australia (+4).
The biggest influence on confidence is availability of suitable labour – identified by around 1 in 6 bankers.
Other Key Issues
Other key issues include: government policies & regulations; wage costs; pressure on margins; the outlook for their business; weather related events; and consumer demand.
Capital expenditure conditions were also positive in the fourth quarter of 2018 (+15).
The outlook is expected to weaken a little in the next three months (+12), but remain near current levels in 12 months’ time (+14).
By region, conditions are strongest in Wellington (+36) by a large margin.
Other regions enjoying strong conditions were: Bay of Plenty/Gisborne/Hawke’s Bay (+28); Auckland (+21); Otago/Southland/Nelson/ Marlborough (+21); & Waikato (+15). They are weakest in Taranaki/Manawatu-Wanganui (0) & Canterbury (+2). • Confidence levels are highest in Otago/Southland/Nelson/Marlborough (+33), and above current conditions. Confidence is also higher than conditions in Taranaki/Manawatu-Wanganui (+8 vs. 0). Confidence is lowest in Canterbury (-22) – one of only two regions along with Waikato (-3) where confidence is negative.
The above Report (published here only as a small extract) was prepared by Dean Pearson, Head of Behavioural & Industry Economics and Janine Ogier, External Communications Consultant at Bank of New Zealand.