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Businesses still bullish, more expect to start hiring, investing

Wednesday 28th April 2010

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New Zealand businesses kept their upbeat outlook on the economy this month as more firms flag they will begin hiring and reinvesting in their businesses over the coming year.

A net 50% of companies surveyed expect business conditions to improve over the next 12 months, up from a net 43% last month, according to the National Bank Business Outlook.

That came amid a net 43% of companies predicting their own activity will improve in the coming year, up from a net 39% in March, and the highest level since March 1999.  

"The positive expectations towards their own businesses look to be spilling into other survey indicators," chief economist Cameron Bagrie said in his report.

"If expectations reading is maintained and matched by reality, then increased hiring and investment will naturally follow." 

New Zealand's economy climbed out of its worst recession in 18 years in the middle of last year, though consumer spending has been slightly subdued amid an 11-year high unemployment rate at 7.3% in the three months ended December 31.  

Hiring intentions rose to a net 13% from 8.7% in March, and a net 4% of respondents are picking the unemployment rate to drop, the first time businesses have been optimistic on the labour market since March 2001. Investment intentions rose to a net 10% from 9.3% last month. 

Companies are more bullish on their profit expectations, with a net 26% expecting to make more money in the coming year, compared to a net 19% in March.  

A net 26% of businesses are still expecting to increase their prices over the next 12 months, though their expectation for inflation crept up to 2.67% from 2.64% a month ago.

The Reserve Bank will review the official cash rate tomorrow and is expected to keep it on hold at a record low 2.5% after first quarter inflation data was softer than market expectations at 0.4%.

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