Business confidence leaps again
The latest National Bank business confidence survey is “tremendously encouraging” says the bank's chief economist Khoon Goh.
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The latest National Bank business confidence survey is “tremendously encouraging” says the bank’s chief economist Khoon Goh.
The survey shows another leap in business mood - a net 44% of firms expect an increase in their own activity in the coming three months, up 5% on the June survey figure.
Hiring intentions rose from a net +10% to a net +18.9% and investment intentions also rose from a net +26% to +29%.The composite growth indicator puts GDP growth at 5% for the year ahead, he said.
“With growth in the first quarter of the year coming in at 0.8 percent (annualised 3.2 percent) and revisions to prior quarters, the noted mismatch between business sentiment (which has been portending of better times for a year) has been settled.“There is no gap between expectations and reality. Reality is catching up with the expectations.”
The risk in this though is that New Zealand’s economic situation looks so good – especially against the troubled Atlantic economies – that the New Zealand dollar creeps too high.“The danger in such instances is that financial markets front-run the story so far via a higher currency and expectations of higher interest rates that one nucleus of support, namely loose financial conditions disappears before the party has moved beyond 9pm.
That said, the Reserve Bank – which reviews the official cash rate tomorrow morning – is going to have to signal a rate rise soon, even if it does not lift the official cash rate from its current rate of 2.5%.
“An OCR at 2.5% looks on borrowed time.” Mr Goh said.
“Brace for interest rates to move up. The March insurance cut [from 3%] needs to be unwound.”
“ Challenges remain of course, particularly globally, that need to be respected.
“However, raising the OCR from 2.5% not tightening policy. It is marginally unwinding a huge degree of support – call it taking the OCR from being extraordinarily low to just exceptionally low.”
Rob Hosking
Wed, 27 Jul 2011
Wed, 27 Jul 2011
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Business confidence leaps again
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