NZ business confidence lifts in April, may point to economy finding a floor

Wednesday 29th April 2009

Business confidence lifted strongly between March and April, while remaining in deeply negative territory, according to the latest National Bank Business Outlook.

The bank's chief economist, Cameron Bagrie, is calling it cautiously: "It's about smaller rates of decline rather than moving into positive territory.

The bank's monthly barometer of the business mood saw big reductions in the numbers of pessimists on two fundamental indicators: confidence and "own activity" expectations.

Confidence had its biggest bounce back since December 2000, sitting in April at 15% net pessimists, compared with 39% a month earlier.

Likewise, "own activity" expectations had their biggest turnaround in 16 years, to a net 4% now expecting conditions to worsen over the next year, vs a net 21% negative a month earlier.

The latest result was announced ahead of Thursday morning’s Official Cash Rate review, in which a cut of 25 to 50 basis points is expected from the Reserve Bank of New Zealand.

Exporters also rebounded into slightly positive territory from very negative in March.

Merchandise trade figures out today showed exports exceeded $4 billion for the first time last month, reflecting an aircraft sale and a jump in meat shipments.

While other key indicators including employment and investment intentions remain very negative this month, Bagrie says it makes sense to see the New Zealand economy "finding a floor" after six quarters of recession - the most prolonged since the 1970's.

Policymakers have been working hard to achieve such stabilisation since mid-2008 and natural population growth and improving migration provide a natural base effect to growth.

"We see a bungy-cord dynamic taking hold" and tighter monetary conditions in April had been "swatted aside" by business decision-makers.Among reasons for optimism: "a poor global economy makes New Zealand look a relatively attractive proposition both to those immigrating, and those departing.

"This is translating into firming optimism (or less pessimism) towards the economy."

Business confidence surveys were known to be an important leading indicator and "such nuances should be respected."

"The first towards recovery is finding a floor. If indeed this gains momentum over the coming months, then attention will turn towards the quality and magnitude of any pending recovery," Bagrie said.

Businesswire.co.nz

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