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Christina Leung: NZIER Principal Economist on business confidence going up in new survey · Best of Business

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  Speaker 2: Let's get to business confidence. So it surged according to
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  Speaker 2: the latest quarterly survey of business opinion. This is despite
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  Speaker 2: the Middle East conflict and, of course, the upcoming election. NZIER,
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  Speaker 2: the people who do it, the principal economist Christina Leong
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  Speaker 2: is with us right now. Hi, Christina.
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  Speaker 3: Kia ora. Kia ora.
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  Speaker 2: So how do we explain having net 40% of firms
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  Speaker 2: expecting the economy to improve and a jump that was
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  Speaker 2: massive up from net 14% in June?
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  Speaker 3: That's right. So when we ask businesses for this headline
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  Speaker 3: confidence measure, we're asking businesses, what are you feeling in
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  Speaker 3: terms of your expectations for the overall general economic conditions
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  Speaker 3: over the coming months? So it might be the case
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  Speaker 3: that because firms have been pessimistic for a while and
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  Speaker 3: have seen quite challenging conditions, when asking how you're feeling
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  Speaker 3: for the months ahead, a little bit like they're finally
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  Speaker 3: starting to see that light at the end of the tunnel. Now,
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  Speaker 3: noting that despite this jump in headline business confidence, when
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  Speaker 3: it comes to what's going on in firms' own domestic
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  Speaker 3: trading activity, that's actually still looking fairly soft. So we
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  Speaker 3: had a net 1% of firms reporting a contraction when
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  Speaker 3: it comes to activity in their own business. Yeah.
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  Speaker 2: Is it possible to explain that by saying that what's
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  Speaker 2: going on is we are seeing the business slump that happens,
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  Speaker 2: the activity slump that happens before an election... And so
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  Speaker 2: they're seeing that play out in real term. But when
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  Speaker 2: they look ahead post-election, it should pick up, and hence
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  Speaker 2: the confidence.
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  Speaker 3: That could be one way to explain the results. But
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  Speaker 3: I would have to say that generally, over the history
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  Speaker 3: of the Business Confidence Survey, we do tend to see
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  Speaker 3: that uncertainty about heading into the general election, about the
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  Speaker 3: outcome of the election. at that extra layer in terms
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  Speaker 3: of firms becoming more cautious when it comes to hiring
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  Speaker 3: an investment. But that's not the case this time around.
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  Speaker 3: In fact, even with conditions still quite weak, firms, because
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  Speaker 3: they're expecting a recovery in demand ahead, are actually now
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  Speaker 3: planning for hiring an investment over the coming year.
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  Speaker 2: Did you see quite a big bounce in confidence for
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  Speaker 2: the construction sector?
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  Speaker 3: The jump in business confidence was actually quite broad-based across
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  Speaker 3: the sectors, and that's including the building sector. So if
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  Speaker 3: we look at what are conditions facing the building sector,
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  Speaker 3: that's actually been improving. The fact that building sector firms
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  Speaker 3: are reporting an improvement in output and also new orders,
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  Speaker 3: things are improving for them. However, it's quite a mixed
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  Speaker 3: picture when it comes to the outlook ahead when we
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  Speaker 3: ask architects based on work in their own office, what
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  Speaker 3: they're expecting for the pipeline of construction work. Overall, it's
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  Speaker 3: still looking fairly soft for housing, commercial and government construction work.
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  Speaker 2: Yeah, and what do you think is the one thing
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  Speaker 2: that they are pinning as potentially holding them back? Would
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  Speaker 2: it be the lack of skilled workers?
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  Speaker 3: So if we look across the fact that firms are
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  Speaker 3: now looking to hire again, but they are starting to
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  Speaker 3: bump up against some labour shortages, and particularly the case
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  Speaker 3: when it comes to skilled workers. Firms are reporting it
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  Speaker 3: increasingly more difficult to find skilled workers. So it does
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  Speaker 3: look to be a case that that speed capacity in
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  Speaker 3: the labour market is starting to dissipate as hiring demand improves.
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  Speaker 1: Yeah.
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  Speaker 2: Hey, it's good to talk to you, Christina. Look after yourself.
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  Speaker 2: Christina Leong, NZIER Principal Economist.
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