NZ business confidence rises to near 15-year high, suggesting a booming economy, ANZ says

Wednesday 18th December 2013

New Zealand business confidence rose to its highest in almost 15 years this month, adding to evidence the economy is picking up pace.

A net 64.1 percent of firms are optimistic about general business conditions, up from 60.5 percent last month, according to the December ANZ Business Outlook survey. Firms seeing a pickup in their own business activity rose to a 19-year high of 53.5 percent from 47.1 percent last month.

ANZ's composite indicator of business and consumer confidence indicates the two sides of the production-spending equation are in alignment, with the potential for annual economic growth to accelerate by more than 5 percent over the first part of 2014.

"That augers well for an economic expansion with real legs, said ANZ New Zealand chief economist Cameron Bagrie.

Confidence in the agriculture sector surged to a 19-year high of 54.5 percent, while manufacturing confidence hit a 15-year high of 56.1 percent and services reached the highest reading in 14 years of 68.5 percent. Sentiment in the construction sector at 66.7 percent and retailing at 65.4 percent remained "extremely elevated", ANZ said.

The survey results are "incredibly strong" with firms' profit expectations pushed beyond last month's 19-year high to 39.7 percent from 37.3 percent. Employment intentions are the strongest in 19 years at 24.7 percent while residential construction intentions at 66.7 percent are the highest in almost 24 years and commercial construction intentions are robust at 41.2 percent.

Bagrie said the last time the survey recorded such high readings in 1994 and 1999, the economy was in full swing with GDP growth of more than 5 percent and the latest survey results "portend a booming economy".

"All this momentum is occurring despite headwinds from an elevated New Zealand dollar and overwhelming expectations interest rates are going to be moving up," Bagrie said. A net 71 percent of survey respondents expect higher interest rates over the year ahead and a net 31 percent of firms expect to raise prices.

One of the biggest challenges over the coming year will be ensuring supply can meet demand so inflation remains in check, Bagrie said.

BusinessDesk.co.nz

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