Business confidence declines, outlook optimistic

NZ business confidence extends decline, outlook still optimistic

by Paul McBeth

Dec. 17 (BusinessWire) – Business confidence extended its decline for the third straight month, though firms are still relatively optimistic about the coming year, according to the National Bank Business Outlook.
A net 38.5% of respondents expect better times in the next 12 months, down 4 percentage points from a net 43.4% a month earlier.

Still, firms are more bullish about their own activity outlook and export intentions, with the former rising to 39.9% of respondents predicting an upturn in their own business compared to 33.7% a month ago, and 25.6% expecting to export more, compared to 23.9% in November.

“The scene is set for a respectable upswing across the economy,” said the bank’s chief economist Cameron Bagrie in his report. “Yet, uncertainty remains as to how much of the improvement emanates from base effects or the feel-good factor from simply emerging from recession.”

New Zealand’s economy climbed out of its deepest recession in 28 years in the second quarter of this year.

The Treasury and Reserve Bank expect economic growth to bounce back faster than earlier anticipated, and the country’s long-term debt track shrank as the government reined in its borrowing programme.

Businesses were also more optimistic about their profit expectations in the coming year, with a net 16.4% of respondents expecting higher margins, compared to 11.1% in November.

Hiring expectations edged up 1.1 percentage points to a net 6.4% of respondents likely to take on new staff, and predictions on unemployment eased to 28.9% of firms picking the jobless rate to rise, compared to 35.3% a month ago.

The Treasury predicts unemployment will peak at 7% next year, though Finance Minister Bill English doesn’t expect employment to bounce back very quickly, as businesses have tended to cut working hours rather than lay off staff in response to the global financial crisis.

Construction is still the most confident sector of the economy, though it is being closely followed by retailing, services and manufacturing, Bagrie said.

Expectations for the annual inflation rate next year slipped to 2.54% from 2.61%. Some 17.7% of firms expect to lift their prices over the next 12 months compared to 14.8% a month ago.

“Intent does not necessarily match reality – although the correlation is pretty good – but this is the sticky sort of inflation that can prove to be persistent,” Bagrie said. Last week, the central bank talked down inflationary prospects, predicting the consumer price index will remain under 2% until 2011.

(BusinessWire) 16:23:46

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