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NZ business confidence climbs to a 7-year high on optimism recession will abate

Wednesday 29th July 2009

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New Zealand business confidence climbed to a seven-year high in July amid growing optimism the economy will climb out of its worst slump in 30 years over the next 12 months.

A net 19% of firms expect general business conditions to improve in the next 12 months, the highest since March 2002 and up from 5.5% in June, according to the National Bank Business Outlook. Manufacturers showed the biggest improvement in confidence, with all sectors showing a pick-up from the previous month, according to the report.

Lower borrowing costs, fiscal stimulus and increased migration are helping stoke expectations that the worst of the slump is now in the past. The NZX 50 Index climbed has climbed above 3,000 this week for the first time in nine months, while on Wall Street, the Dow Jones Industrial Average climbed above 9,000 for the first time since January.

The survey “suggests that the light at the end of the recession tunnel may be just around the corner,“ said Cameron Bagrie, chief economist at ANZ National Bank. “Improved confidence is an important step toward recovery and we appear to be making that first step.”

A net 13% of firms expected an improvement in their own activity over the next 12 months, up from 8% in June. Optimism about the future has also curbed the drive to cut workers, with a net 7% planning to reduce staff in the latest survey, down from 17% a month earlier.

In a sign of more buoyant time to come, Fisher & Paykel Appliances today said workers at its Auckland refrigeration plant will return to a 40-hour week as orders pick up, having been the first recipients of the government’s Job Support Scheme subsidies aimed at saving jobs.

“Although all markets remain tough in terms of trading, the East Tamaki plant, coming into its traditional peak production season, has sufficient orders going forward to enable it to return to normal working hours,” Chief executive John Bongard said in a statement.

Interest rates are expected to remain low for some time, with Reserve Bank Governor Alan Bollard set to keep the official cash rate at a record low 2.5% tomorrow.

Export intentions rose this month, with a net 14% of those surveyed expecting to send more goods overseas in the next 12 months, up from 10.7% in June. Confidence in residential construction edged up to 23.5% from 22.2%, suggesting a shortage of listings at real estate firms is spurring demand for new builds.

A net 13% of respondents expect to raise prices in the next 12 months, up from 8.5% last month.Companies grew less pessimistic about profits, with 14% predicting a decline in earnings, an improvement from 24% in June.

Businesswire.co.nz

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