- Cameron Bagrie, ANZ New Zealand Chief Economist
New Zealand business confidence strengthened in October, as signs of recovery in dairy prices saw companies more confident about their profitability, plans to hire and invest more in their businesses. The ANZ Business Confidence Index rose to 10.5 this month up from –18.9 in September. A reading above zero points to optimism, whereas a reading below zero signals that pessimism prevails. A net 24% of respondents saw their own activity expanding in the coming year, up from a net 17% in September. The New Zealand Dollar gained 60 pips versus the US Dollar following the data release to trade at $0.6731.
Earlier in the year a sustained decline in dairy prices, forecasts for dry weather, as well as an absence of inflation saw the Reserve Bank of New Zealand cut the benchmark interest rates three times to 2.75% from 3.5%, and has forced economists to revise downwards their economic outlook. Even though the price for dairy, the country's top export commodity, remains volatile, it has started to show signs of recovery and rebounded from its lows. Nevertheless, economists still predict the central bank to lower the cash rate by a further 25 basis points in December.
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