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NZ businesses still optimistic, though investment intentions lag

Wednesday 31st March 2010

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New Zealand businesses remained upbeat about the outlook for the economy this month, though there are still concerns about the pace of economic recovery as firms’ investment lags behind.  

A net 43% of companies surveyed expect economic conditions to improve over the coming year, down from a net 50% in February, according to the National Bank Business Outlook. Still, the bank’s chief economist Cameron Bagrie said this “represents a healthy level of optimism across the economy,” even though firms’ investment intentions at a net 9.3% lagged behind normal levels. A net 7.6% of respondents expected to boost business investment last month.  

“A significant challenge the economy faces is prospects for investment,” Bagrie said in his report. “It is one of the few survey indicators that remain below its historical mean (of 13), so clearly an element of caution remains.”  

New Zealand’s economy ground its way out of recession in the June quarter last year after its deepest downturn in 18 years, and gross domestic product grew 0.8% in the three months ended Dec. 31.

Tepid housing data at the start of the year had previously taken the sheen off the country’s recovery, though February’s business survey offered the first tangible piece of good news in 2010.  

Retailers propped up the headline figure this month after dipping in February, and companies rebuilding inventories helped bolstered last year’s fourth-quarter growth.  

Hiring intentions dipped to a net 8.7% from 9.3% last month, though firms were more optimistic that unemployment had peaked, with only a net 6.1% of respondents picking the jobless rate to rise compared to 10% a month earlier.  

Firms were unchanged in their outlook on prices, with a net 26% expecting to raise prices, and inflation expectations rose to 2.64% from 2.56% a month earlier.

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