Business confidence improves in April, but outlook remains negative

Business confidence in New Zealand seemed to show a "marked improvement" in April from March, National Bank Chief Economist Cameron Bagrie said. The latest National Bank Business Outlook survey showed a net 15% of respondents expected deterioration in the general economy over the next 12 months, compared to net 39% in March. "This turnaround is the largest monthly improvement since December 2000," Bagrie said. "Could this be the first steps of a recovery taking hold "” the much talked about green shoots? We would dearly like to believe that it is. After all, the economy has been in recession since early 2008, and we are possibly in the midst of the sixth straight quarterly contraction in economic activity "” the longest negative streak since the 1970s," he said. Yet despite tentatively asking whether green shoots may be starting to show through the cracks, Bagrie said "it would be naïve to believe the economy is on the cusp of economic nirvana." "There are structural imbalances that have yet to be purged. Green shoots are fragile and, if not tended to properly, can quickly wilt." The outlook for respondents' own activity improved, with only a net 4% of respondents expecting deterioration in their own firm's activity over the next year, compared to net 21% in March. Investment intentions over the next year remained negative, with a net 12% of respondents saying they expected to invest less in their business over the next year. However, this was down from net 19% in March. The unemployment rate is still set to continue to rise, with a net 19% (net 28% in March) of business owners saying they expected to reduce the amount of employees they have over the year. The news comes a day before Reserve Bank Governor Alan Bollard makes the next scheduled announcement on the Official Cash Rate. Expectations are for either a 25 basis point cut to 2.75%, or a 50 bp cut to 2.50%. A net 2% of respondents said they expected interest rates will go lower over the next year, however this was down from a net 55% expecting them to do so in March.