Business confidence on the up

ANZ economist Cameron Bagrie says business confidence is improving.

New Zealand business confidence improved in February as recent gains in dairy prices turned sentiment around in the agriculture sector, and as low interest rates stoke hiring and investment expectations.

A net 34.4 per cent of firms are optimistic about the general economy, up from 30.4 in the previous survey, according to the ANZ Business Outlook.

That was aided by a turnaround in agriculture to a net 15.2 per cent becoming optimistic, having previously been dominated by pessimists.

Firms' own activity outlook showed a net 40.9 per cent of respondents upbeat on their prospects, compared to 37.3 per cent.

"General confidence, profit expectations and employment intentions in this sector (agriculture) have flipped from negative to positive," ANZ Bank New Zealand chief economist Cameron Bagrie said in his report.

"Higher dairy prices are no doubt working their magic. Such a bounce-back is particularly welcome considering challenges delivered by Mother Nature."

Last month, the New Zealand Institute of Economic Research's quarterly survey of business opinion showed firms remained optimistic about the country's economic outlook, even as tepid inflation caused more concern about profitability.

Today's ANZ survey showed a net 28.1 per cent of respondents are picking profits to improve compared to a net 20.6 per cent in the previous survey, with a net 23.4 per cent intending to raise prices, up from 20 per cent.

One year ahead inflation expectations slowed to 1.72 per cent from 2.13 per cent.

Investment intentions increased to a net 22 per cent from 20.2 per cent, and hiring intentions increased to 23.3 per cent from 19.9 per cent.

The prospect of low interest rates continuing, and increasing competition by banks to secure business customers saw a net 27.3 per cent of respondents expecting access to credit becoming easier, up from 15.6 per cent.

A net 23.3 per cent of respondents see interest rates going lower, compared to a net 12.7 per cent seeing a rise in the previous survey.