Business confidence increases

Business confidence has continued to increase, according to the latest National Bank Business Outlook survey.

A net 47% of respondents expected general business conditions to improve in 12 month’s time, up 9 points on the previous month. While business confidence lifted another notch in June, other indicators from the survey generally failed to follow the improving trend, stabilising around May’s readings.

"Our composite indicator, which includes firms’ own activity expectations, employment and investment intentions is flagging 4.5% growth," National Bank chief economist Cameron Bagrie said. "We can detect a strong rural flavour coming through the results with the likes of Waikato strong across various measures in the survey."

While Canterbury remained the most optimistic region according to general business confidence (+60), such exuberance has not flowed through into other measures and they 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,"

Mr Bagrie said. Inflationary gauges from the survey eased. A net 27% of firms expected to be raising prices over the year ahead, down from a net 34% last month. One-year-ahead inflation expectations eased from 3.3% to 3.2%. "We take mild comfort from both. Second-round pricing risks associated with a high headline rate of inflation are not manifesting, for now," Mr Bagrie said.

"Just like last month there will be the obvious questions surrounding expectations and reality. Will lofty business confidence readings translate into reality or are we set for a repeat of mid 2010? We side with the former."

NBR staff
Thu, 30 Jun 2011

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Business confidence increases