Business confidence dipped in May but remains at very high levels historically, according to the National Bank business outlook report.
Overall, a net 48.2 percent of respondents expect an improvement in business conditions in the year ahead in the May survey compared with 49.5 percent in the April survey. The February figure of 50.1 percent was the highest reading for business confidence since 1999.
A net 45.3 percent expected better times ahead for their own business, compared to 43 percent in the April survey.
The past month has seen the New Zealand dollar tumble, increasing unease towards the sovereign debt crisis in Europe, a sell off in global equities, mixed economic messages and an economy friendly budget.
"Nothing seems to be denting the air of optimism towards prospects for the New Zealand economy," said senior National Bank of New Zealand economist Khoon Goh.
All sectors except manufacturing recorded a confidence fall. The construction sector remained the most optimistic even though it showed the biggest drop in the month. The agriculture sector continued to have the lowest level of confidence.
Employment intentions rose three points with a net 16 percent now expecting to hire additional staff. This is the highest reading since April 2002 and consistent with around 4 percent employment growth.
Investment intentions rose four points.
"Our composite growth indicator from the survey continues to point towards a strong recovery ahead. The composite indicator is at a level which is consistent with over 5 percent year-on-year growth by the end of this year," Mr Goh said.
There was, however, an unwelcome inflationary undertone. Pricing intentions rose, with a net 28 percent now expecting to push prices higher, a level consistent with around 3 percent annual headline inflation, before accounting for GST changes.
A further increase in capacity utilisation also suggested the recovery was starting to use up spare resources in the economy at perhaps a quicker rate than expected.
NZPA and NBR Staff
Mon, 31 May 2010