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Business Confidence
Business confidence indexes are considered to be valuable leading indicators of economic activity. They are particularly useful for identifying turning points in the cycle of business activity.
Business confidence in Canterbury fell to a five year low in June 1996. With the exception of a slight recover during the summer of 1995/96 the National Bank’s index of general business confidence for Canterbury has fallen for over two years. The index has declined from a peak in March 1994, when 80 percent of businesses expecting an improvement in trading conditions, to a June 1996 low of minus 11 percent. This index has yet to identify any marked improvement in local business sentiment. The positive outlook represented by other statistics suggests this result may be associated with the high level of uncertainty surrounding the first MMP election in October (Figure 3.4).
Source: National Bank of New Zealand
The Canterbury Manufacturers’ Association (CMA) survey reveals a similar pattern of high business confidence followed by a pronounced decline. Confidence in this sector is now at historically low levels (Figure 3.5). The CMA believe confidence in manufacturing has been "marking time" over recent months waiting for an indication as to the impact of the Australian budget on demand in this crucial export market. Manufacturers are also closely watching the results of our own central government election for any indication of changes in monetary policy which may effect exchange rates and hence international competitiveness. It should be noted that the CMA continue to highlight the detrimental impact tight monetary conditions are having on manufacturers’ through high interest and exchange rates.
Source: Canterbury Manufacturers Association