Business confidence lifts to highest level in a year

Business confidence has improved to its best level in a year but still remains markedly pessimistic.

The ANZ Business Outlook for November shows a net 26 percent of businesses expect conditions to deteriorate in the year ahead, from last month's 42 percent.

The more closely followed measure of individual businesses' outlook (own activity measure) has rebounded into positive territory after falling for five months in a row.

A net 13 percent expect their firms to do better compared with a pessimism level of 4 percent last month.

"The significant easing in both interest rates and the exchange rate is clearly working its way through the economy, and the remarkable resilience of New Zealand's commodity prices is providing an invaluable buffer to the world's woes," ANZ chief economist Sharon Zollner said.

The survey showed companies expecting to invest more, hire staff, and export more, with fewer expecting their profits to fall.

Zollner said the agriculture and retail sectors were leading the improvement.

She said better commodity prices were lifting the rural gloom, while the lower interest rates and an improving housing market seemed to be filtering through to consumer spending and shops.

But the economy still faced headwinds such as rising costs, getting credit, strong competition in some sectors, policy uncertainty, and downbeat international outlook.

"This makes for a constrained growth outlook. But as we have long said, there is no reason for the New Zealand economy to go into recession as things stand," Zollner said.

She said economic growth should find a base at a 2 percent annual rate, and gradually recover.

Earlier this month the Reserve Bank held its benchmark official cash rate steady at a record low 1 percent, saying the economy had not got any worse in recent months.

Financial markets still expect the RBNZ to cut at least once and possibly twice next year.

This article was originally published on RNZ and re-published with permission.

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