NZ firms looking on the bright side

By Brian Fallow

Cameron Bagrie. Photo / Supplied
Cameron Bagrie. Photo / Supplied

Business confidence continues to strengthen in the National Bank's latest survey, with the construction sector leading the charge.

A net 28 per cent of respondents expect the general business environment to improve over the year ahead, up 11 points from the previous survey in December.

Firms are also more optimistic about their own activity, a net 31 per cent expecting it to pick up, five points higher than last time.

These are the strongest readings for these gauges since September last year.

The bank's chief economist Cameron Bagrie said the pall of gloom about the global scene, especially evident in the September quarter last year, had dissipated somewhat.

"It's not all fine and dandy but it looks like people are deciding we have go to get on with it here, which is encouraging."

Global challenges were balanced by an improving housing market and prospects of lower interest rates for longer.

Firms' expectations for profits and exports both improved, as did hiring intentions, and while investment intentions dipped, they remain high by the subdued standards of the past three years.

Confidence lifted across all five sectors - retail, manufacturing, agriculture, construction and services.

Construction was the standout, leading for general business confidence, own activity expectations, employment intentions (the highest in 17 years) profits and investment intentions.

Inflation gauges in the survey augured well for the Reserve Bank taking a patient approach, Bagrie said.

Inflation expectations continued to drift lower, to 2.7 per cent from 3 per cent last time and a peak of 3.5 per cent six months ago.

Firms' pricing intentions lifted, with a net 19 per cent of firms intending to raise prices, but the level remains well below where it was during the first half of last year.

And pricing intentions in the construction sector, a cyclical barometer of inflationary undercurrents, remained broadly unchanged, Bagrie said.

Businesses had started the year in good cheer, he said, but whether that flowed through into real activity remained the million dollar question.

The economy had several major forces acting on it at once - a volatile global environment, the need to repair the national balance sheet, the need to rebalance from consumption-led to export-led growth, a boost to national income from high export prices, and the earthquakes.

Some businesses were adapting better than others to the structural changes, global and local, confronting them, in terms of reinvigorating their business models.

"Those who can adapt are becoming the hunters and those who don't are going to become the hunted," he said.

- NZ Herald

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