NZ business confidence turns positive for first time in 8 months

Wednesday 27th May 2009

Business confidence turned positive for the first time in eight months, amid optimism the economic prospects for New Zealand are improving, according to the National Bank Business Outlook.

A net 3.8% of firms expect the economy to improve, from minus 3.8% last month. The bank’s monthly gauge of business sentiment saw the number of optimists exceed pessimists for the first time since September last year.

With the likelihood of a technical recovery in the second half of the year, the bank’s chief economist, Cameron Bagrie, said “confidence was up across all segments.” Still, even under the assumption of solid growth next year, the economy won’t return to late-2007 levels until 2011, he said.

“Importantly, firms’ expectations of their own activity clawed back into positive territory,” Bagrie said.

The economy isn’t yet “out of the woods” with most of the indicators in the series firmly below Asian crisis levels, when the country’s economy was last in recession a decade ago. The weak profit outlook is “naturally putting the kibosh on hiring and investing” with the labour market outlook particularly poor, he said.

Companies’ employment expectations over the next 12 months improved to minus 16% from minus 19% last month.

The bank said exports “bucked the general improving trend” with a net 6% of firms expecting to lift international sales in the coming year. Weak global demand and prolonged strength in the currency weren’t “a pleasant mix” for exporters.

Fonterra Cooperative Group reduced its forecast for the 2010 season to $4.55 per kilogram of milk solids from $5.20 this season, blaming the strong kiwi for the prediction. The world’s largest dairy exporter took a pessimistic stance, and may be trying to under-promise, said Deutsche Bank chief economist Darren Gibbs.

Businesswire.co.nz

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