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New Zealand Business Confidence Surges to 14-Year High

Posted by Chris Advincula on Oct 8, 2013 4:46:00 AM

New Zealand business confidence surged to a 14-year high in the third quarter, signaling the economy is rebounding from a mid-year slowdown.

A gauge of confidence based on a survey of about 900 businesses by the New Zealand Institute of Economic Research rose to 38 from 32 three months earlier, the most since the first quarter of 1999. The seasonally adjusted measure increased to 32 from 30, the highest since the first quarter of 2010, NZIER said in Wellington today.

“Businesses are optimistic, activity is rebounding and this is being gradually realized into more jobs and profits,” NZIER principal economist Shamubeel Eaqub said. The rebound in domestic trading activity is consistent with annual economic growth of about 3 percent, he said.

The New Zealand dollar rose after the report before easing to trade little changed at 83.06 U.S. cents at 10:56 a.m. in Wellington.

Economic growth slowed to 0.2 percent in the second quarter from 0.4 percent three months earlier as a drought curbed farm output. The Reserve Bank has said it is likely to start raising interest rates next year as the annual pace of growth picks up to 3.5 percent, the fastest since 2007, led by consumer spending, house construction and rebuilding in earthquake-damaged Christchurch.

Christchurch Rebuild

“Growth has been very concentrated in Canterbury,” Eaqub said. “Now we’re starting to see it broadening out across other regions, which is very positive.”

A net 8 percent of firms said trading activity improved in the third quarter, and 30 percent expect further gains in the current quarter, today’s report showed.

A net 12 percent of firms expect profits to increase this quarter after a net 8 percent reported a decline in the third quarter.

The survey showed firms expect the central bank to raise rates from a record-low 2.5 percent over the course of next year despite subdued inflation and the imposition of lending restrictions on Oct. 1 to curb a housing boom, Eaqub said.

The confidence survey signals “a solid pace of annual growth momentum over 2013,” Mark Smith, senior economist at ANZ Bank in Wellington, said in a research note. “Increasing pressures on capacity are likely to prompt rate hikes, but this continues to be a 2014 story.”

New Zealand’s budget deficit is narrowing faster than forecast, and Finance Minister Bill English said yesterday the government remains on track to return to surplus in the year to June 2015. 


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