New Zealand firms recorded a further lift in their overall level of optimism about the general economy, according to the latest ANZ Business Outlook.
ANZ chief economist Cameron Bagrie said the general business confidence measure lifted from +53 in October to +61 in November, just shy of a fifteen year high for the series.
"On a major divisional basis the retail sector recorded the largest lift in confidence in November, rising from +48 to +70, the highest across the five major divisions and the sector’s highest reading since July 1994," he said.
A fresh record was also set at the other end of the sectoral scale.
The agriculture sector reported the lowest level of business confidence, but at +51, it has been nearly 20 years since the lowest sectoral level of optimism was this high. Firms’ expectations regarding their own business prospects were unchanged, at a 14½-year high of +47.
On a sectoral basis, own activity mimicked the theme in general business sentiment.
The retail sector topped the lot at +53, while at the opposite end of the spectrum the agriculture sector recorded the lowest reading, at +39.
And similar to general business confidence, the lowest-ranked sector ratcheted up to a 19- year high. Expected profitability and labour hiring both hit 19-year highs, with respective net balances of +37 and +23.
Expected profitability was the highest in the agriculture sector, while anticipated employment growth was the highest for the construction sector.
"These results reflect the positive tailwinds for the economy at present – high commodity prices and a resurgence in house construction, underpinned by the Canterbury rebuild. Pricing intentions increased 3 points to +25, but this remains the second lowest level in the past six months," Bagrie said.
However, at 2.43%, expected inflation was at a 16-month high. An expected lift in interest rates touched a 27-month high, as the NZ business community becomes more cognisant of prospects for rises in the official cash rate next year.
"The tone of this month’s survey reinforces the developing theme of a business environment experiencing renewed vigour.
"With less than a month until the summer holidays, we see the economy riding the crest of a business optimism wave.
"Our composite growth indicator portends boom times ahead: 5 percent growth. That’s pie-in-the-sky stuff but we agree with the spirit – good times ahead," Bagrie said.
"Like a novice surfer paddling away from the danger zone of the GFC rip, the economy’s confidence has grown, so much so that it is now “hanging ten” toes of both feet over the edge of the surfboard.
"This will bring both challenges (rising interest rates and a stubbornly high exchange rate) and opportunities.
"Our attention is now turning to the duration of the economic expansion. We’re masters of our own destiny to a degree in this regard.
"We’re seeing growth without significantly rising inflation at present – a so-called goldilocks economy. How long she sleeps in our bed will increasingly come down to the underlying productivity story. The last thing New Zealand needs at present is for complacency to creep in."
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