-Cameron Bagrie, ANZ chief economist
New Zealand business confidence rose in February to the highest level in seven month, as recent rise in dairy prices brightened mood in the agricultural sector, while low interest rates boost hiring and investment expectations. The ANZ Business Confidence index jumped to 34.4 in February, up from 30.4 in December, reaching the highest since July and marking almost four years of optimism in the business sector. That was triggered by a turnaround in agriculture to a net 15.2% becoming optimistic, having previously been outnumbered by pessimists. A net 28% of businesses anticipate higher profits ahead, up from 21% when the survey was last conducted in December. Hiring expectations also firmed from a net 20% in December to 23% in the reported month, while investment intentions rose from 20% to 22%. Inflation expectations were lower in February, but more firms expected to raise prices. One-year ahead inflation expectations slowed to 1.72% from 2.13%.
Last month, the New Zealand Institute of Economic Research's quarterly survey of business opinion revealed companies remained upbeat about the country's economic prospects, even as tepid inflation sparked more concern about profitability. The RBNZ's neutral stance on interest rates provides businesses with a predictable investment environment, and remove some pressure from households, which should boost economic growth this year.
© Dukascopy Bank SA