Business confidence jumps in first quarter

By Phil Boeyen, ShareChat Business News Editor

Thursday 11th April 2002

Business confidence is back in the black with the number of optimists outnumbering pessimists for the first time since June last year according to the latest NZIER Quarterly Survey of Business Opinion.

The survey, which was conducted in the second half of March, shows a net 23% of firms expect general business conditions to improve over the next six months compared to a net 10% of firms expecting a deterioration in the previous survey.

"Confidence increased strongly across all sectors during the March quarter, with the largest improvement occurring in the service sector," the NZIER reports.

"Optimism exists in all sectors and appears to have been driven by a large increase in firms' expectations of higher export sales. However, firms reported an easing in export sales growth in the March quarter, suggesting it is not all go yet."

According to the survey the building sector is the most optimistic sector, with architects reporting a significant improvement in the outlook for housing work over the next two years.

Attitudes towards the general business situation have also improved.

"For the first time in over twelve months firms' confidence in the general business situation has returned to a level that is consistent with firms' own assessment of their output and sales activity.

"Encouraging signs of recovery in the US may have lifted some of the anxiety firms were feeling towards the outlook for world economic growth, boosting their export sales expectations."

Deutsche Bank says the results of the survey are consistent with consistent with other economic data published over recent weeks, which has pointed to buoyant domestic demand.

"Furthermore, exporters have become more optimistic due to an improving global environment. However, the aggregate confidence level of business confidence may be somewhat overstated as the survey does not include the agricultural sector, which has experienced falling confidence on the back of falling global commodity prices."

Deutsche Bank also believes that the sooner-than-expected tightening by the RBNZ is only partly reflected in the data but says that notwithstanding those qualifications the survey result was strong, and the Reserve Bank will see it as further vindication of its decision to start the tightening cycle early.

"The bank based that decision on the outlook for buoyant domestic demand, tight capacity and rising inflation pressure - exactly the situation reflected in the survey."

An AC Nielsen/Rabobank survey of rural confidence released Thursday found that more farmers expect their income to drop in the coming year than in the previous survey, reflecting the effect of falling commodity prices on the farm economy.

Comments from our readers

No comments yet