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Business confidence stabilised but outlook flat

Business and consumer confidence has stabilised following the February earhtquake but the outlook for the economy is still flat, Rabobank said in its latest agribusiness review.

Despite the stabilisation, business and household indicators remain weak, the bank said in its May 2011 review, while the stronger New Zealand dollar has hindered exporters.

Infaltion rose 0.8% in the first quarter, although the Reserve Bank is not expected to shift the official cash rate from the emergency level of 2.5% until unemployment begins to fall, Rabobank said.

The New Zealand dollar rose last month and this week is sitting near 81USc.

"It continues to track in a similar fashion to the Australian dollar, which is bad news for New Zealand exporters."

Rabobank expected the New Zealand dollar to remain reasonably flat from here on, possibly falling back nearer to 75USc, reflecting persistently weak economic fundamentals.

Dairy producers in most regions are have enjoyed one of their best autumns for many years, which is pushing milk flows further ahead of last season and more than recouping earlier production lost by many, the review said.

March export volumes reflected the surge, with shipments for the month up 18% on March 2010.

China continued to dominate, taking 60,000 of product and accounting for almost one quarter of total export volume.

Sheepmeat prices rose to near record levels throughout April and into the start of May, Rabobank said, with farmgate prices in the North Island above $6.80 /kg.

"This was a lift of 10% on March farmgate prices and still a massive $2/kg higher than the same period last year. Beef prices have remained strong, although they have eased back from the highs of early April as the stronger New Zealand dollar took its toll on returns.

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