Business confidence highest since 1999, flagging 2-4% GDP growth

Business confidence took "another strong step forward" in September, reaching levels not seen since 1999 as the post Asian crisis recovery took hold, the latest National Bank Business Outlook survey showed. A net 49% of respondents to the survey said they expected better times over the year ahead, from net 34% in August. The Business Outlook Survey is considered to be a key leading indicator to the performance of the New Zealand economy. "Confidence was up across all sectors bar construction, but this sector still remains the most optimistic with a net 63 percent expecting better times ahead," National Bank economist Steve Edwards said. "Once again, virtually all survey indicators improved in the month. Firms' own activity expectations nudged up a further 6 percentage points on last month. A net 32 percent expect better times ahead," Edwards said. The 'own activity expectations' gauge is flagging 4% growth a year from now, Edwards said. The National Bank's composite growth indicator from the survey "is gradually gaining momentum and pointing to 2 and a half percent economic growth in the middle of next year," he said. "The sectoral picture (for own activity) is somewhat mixed with retailing and manufacturing down marginally but agriculture, construction and services rising sharply. All remain firmly in positive territory giving a uniform picture of composure," he said. Firms' employment expectations showed its first positive reading in 18 months, with net 2% of firms saying they expected to increase staff over the year ahead. However, Edwards noted the unemployment rate was still set to keep rising. "Physical job shedding may be coming to an end, although employment intentions will need to gain further to avert a rising unemployment rate courtesy of new entrants into the workforce, he said. "The sectoral picture for employment is notable for the uniform cluster around zero. Clearly firms are flagging remaining in a holding pattern until they see sustained evidence of an upturn and improved profitability." "Across other survey indicators, export intentions were down, but appear surprisingly resilient in the face of the higher New Zealand dollar. Praise be an uptick in commodity prices over the preceding months, with the ANZ World Commodity Price Index up 12 percent from its February lows." "Pricing intentions weakened, with a net 9 percent expecting to raise prices over the year ahead (previously +15). This is consistent with an annual inflation rate of 1 percent." "Residential investment intentions gave back some of last month's whopper gains, but with a net 39 percent expecting more investment ahead, prospects are for building consents to extend their recovering trend."