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A net of 50 % of respondents to the February survey expect better times ahead, this is up 11 percentage points from December 2009, the highest business confidence level since April 1999. Manufacturing, agriculture, construction and services were all higher across the board and export intentions reflect better volumes expectations in the year ahead, by 31%, this National Bank Business Outlook survey showed.

However, retailing bucked the trend falling 14 points, with a net 7 per cent of retailers expecting to cut employment and 6 percent to be investing less.
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New Zealand’s economic recovery to date has been slower than businesses expected, with firms holding off from acting on earlier intentions, the New Zealand Institute of Economic Research (NZIER) said. (Update 1 adds ASB economist comments.)

The NZIER’s latest Quarterly Survey of Business Opinion (QSBO), which is watched closely by the Reserve Bank, showed business confidence stabilised in the December quarter from September. However, businesses were still “waiting for reality to catch up with expectations,” economist Shamubeel Eaqub said.

“For example, actual hiring is lagging behind hiring intentions and merchants aren’t restocking their shelves despite anticipating a surge in sales. Until firms act on their expectations, the recovery will be shallow and gradual,” Eaqub said.

“Overall, the QSBO suggests that interest rates will need to be lifted around mid 2010 as the Reserve Bank recently indicated. However, a still shallow economic recovery and still weak labour market suggest little urgency to raise interest rates sooner,” he said.

Headline confidence stabilised in the December quarter at net 23% of firms expecting conditions to get better in the next six months, from net 22% in September.

ASB Chief Economist Nick Tuffley said the survey results were broadly consistent with GDP growth of 0.5-0.6% in the December 2009 quarter (full Tuffley comments below). That would follow growth of 0.2% in each of the September and June quarters, when the economy emerged from a recession that began in the first quarter of 2008.

Here are the NZIER’s comments on the December survey:

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Overall business confidence in New Zealand fell for the third month in a row in December, but indicators still point to 3-4% GDP growth over the coming year, the latest National Bank Business Outlook Survey showed.

Business confidence about the wider economy fell 4% from November, to a net 39% of respondents expecting better times for the economy in the year ahead.

National Bank economists said confidence fell for all the main industry groups monitored, although firms’ own activity outlook improved 3% to a net 37% expecting better times in the next year.

The survey, particularly measures of firms’ confidence about themselves, is closely watched by the Reserve Bank of New Zealand due to its close correlation with GDP growth. The Reserve Bank said on December 10 that it expected to keep the Official Cash Rate on hold at 2.5% until ‘around the middle’ of 2010.

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Bernard Hickey delivers an Economic Weather Report on the latest National Bank Business outlook survey of business confidence, which shows businesses expect conditions consistent with GDP growth of 3-4%.

The last time New Zealand had growth that strong the Reserve Bank had the Official Cash Rate at over 7%, yet this time it seems determined to keep it at a record low 2.5%.

It’s time the Reserve Bank looked to start increasing it, despite apparently low inflation right now. At some stage all the fuel from monetary and fiscal stimulus both here and overseas is going to catch fire. The Reserve Bank needs to be applying the protective foam of a rate hike now to ensure the flash fire doesn’t burn too hot.

View our confidence charts here.
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Business confidence remained at “healthy” levels in November, despite dropping slightly over the month, and is indicating economic growth of between 3% and 4% over the coming year, the latest National Bank Business Outlook survey found. (Update 1 includes economist comments.)

A net 43% of respondents to the survey said they expect better times ahead over the next year, down 5% from October. However confidence was “still perky” and remained at levels last seen in 1999, National Bank economist Khoon Goh said.

The latest survey shows firms still expect unemployment to rise over the year ahead, as with interest rates. However, firms’ pricing intentions remained “subdued”, meaning “time still looks to be on the RBNZ’s (Reserve Bank of New Zealand’s) side,” Goh said, referring to the RBNZ’s comments that it expects to keep the Official Cash Rate at its record low of 2.5% until ‘the second half of 2010′.

However, despite the ‘perkiness’ of the survey, Goh still cited the need for policy makers to make some hard decisions regarding economic behaviour, saying “here is hoping (Christmas) does not bring complacency when it comes to the inevitable process of change”.

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Business confidence dipped slightly in October from September after a “meteoric rise” over recent months, the National Bank Business Outlook Survey showed. A net 57% of respondents expect interest rates to rise over the next year, while the figures point to annual GDP growth of between 2.5% and 4%, the same as in September. (Update 3 includes ASB economist comment.)

A net 48% of respondents said they expected better times in the year ahead, down from a net 49% in September. Firms’ own activity outlook also dipped slightly, with a net 31% expecting better times over the next year, compared to net 32% last month.

“It is hard to describe the readings as anything other than stabilising at elevated levels,” National Bank economist Cameron Bagrie said.

“The construction sector continues to set the bar in terms of poise, with a net 75 percent expecting better times ahead. Conversely, confidence eased across the service, retail and manufacturing industries. Despite the turn, the level remains robust and healthy,” Bagrie said.
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