NZ business confidence gains for second month in first steps of recovery

Monday 29th November 2010

New Zealand business confidence rose for a second straight month amid optimism profits will rise and ease of credit will improve in what may be the first signs of stronger economic growth.

A net 33% of respondents are expecting better times ahead this month, up from a net 24% in October, when confidence rose from a 15-month low, according to the National Bank Business Outlook. Companies' expectations for their own activity rose to 35% from 31%.

The survey suggests the New Zealand economy has room to expand without fueling inflation, giving the Reserve Bank less need to rush to raise interest rates. Pricing expectations continued to weaken this month, with a net 17.7% of those polled expecting to raise prices in coming months, down from a net 25.2% in last month's survey. Inflation expectations eased to 2.86% from 2.91%.

"There is no inflationary genie set to leap out of the bottle despite the obvious risks of the GST induced spike in the current quarter," said chief economist Cameron Bagrie. "October was a tentative first step. November has seen this lengthen to a stride."

The survey shows those expecting better profits in the next 12 months rose to 15.4% from 9.5%, while those expecting to hire more workers rose to 11.5% from 7.6% and investment intentions gained to 6.6% from 3.6%.

Ease of credit surged to 10.7% from 1.5%.

The survey also shows better sentiment in residential and commercial construction with a net 31% and 6.2% respectively expecting a pickup in activity, compared to 8.5% and minus 15.8% in the

BusinessDesk.co.nz

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