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Business confidence lifts, survey finds


Thursday 30th June 2011

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Business confidence as measured by the National Bank's monthly survey lifted further in May but other indicators generally failed to follow the improving trend.

A net 47 percent of respondents to the business outlook survey expect general business conditions to improve in 12 month’s time, up nine points on May.

The other indicators generally stabilised around last month's readings.

National Bank chief economist Cameron Bagrie said the composite indicator, which included firms’ own activity expectations, employment and investment intentions, was flagging 4-1/2 percent growth.

"We can detect a strong rural flavour coming through the results with the likes of Waikato strong across various measures in the survey," Bagrie said.

While earthquake-hit Canterbury remained the most optimistic region according to general business confidence, with a net 60 percent expecting improvement, such exuberance was not flowing through into other measures. The region's businesses slipped when asked about activity, employment and profits.

"Such movements highlight the obvious seismic challenges and also why it was so important the Government took such proactive steps in using its own balance sheet last week, giving households -- and implicitly, businesses -- certainty (or hope) over where things are headed," Bagrie said.

Inflationary gauges from the survey eased, with a net 27 percent of firms expecting to be raising prices over the year ahead, down from a net 34 percent last month. One-year-ahead inflation expectations eased from 3.3 to 3.2 percent.

"We take mild comfort from both. Second-round pricing risks associated with a high headline rate of inflation are not manifesting, for now."

The survey did again raise the question of whether lofty business confidence readings would translate into reality, Bagrie said.

He noted a growing disconnect between confidence measures in New Zealand and other countries, particularly the United States where various business confidence measures had been slipping sharply.

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