Confidence up 27% in BNZ survey – updated


I’m not deliberately doing a series of positive posts to cheer up your Monday, it is a coincidence that this makes three in a row.

The latest BNZ confidence survey shows a net 27% of respondents expect the economy to be better in a year’s time.

BNZ chief economist Tony Alexander said, “This is well up from balanced expectations in April and a net 23% pessimistic in March. It is also the equal highest reading on record – though we interpret this more as a sigh of relief lift in confidence rather than an indicator of strong economic activity levels in the near future. ”

He said the survey reasonably predicts the change in confidence which will be reported at the end of the month in the NBNZ Outlook survey which is more details and longer running.

The correlation is shown below:

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To put this in perspective, while improved confidence is welcome, it doesn’t signal a boom. 

For example accountants reported they were busy with more advisory and budgeting work and clients were slow in paying. 

There was a notable absence of generally negative comments from the agriculture sector which was cautious overall. Vets were upbeat but rural real estate was depressed. 

Architects reported low activity levels with patchy signs of improvement while construction showed mixed up and down signs and there were some positive signs in engineering though the sector wasn’t busy. 

Forestry/Manufacturing/Sawmilling reported some positive signs from offshore but indicated some businesses were likely to fail.

There was a little optimism in horticulture with interest from overseas markets but the sector reported labour shortages.

 Human resources reported low activity levels with some mild signs of improvement. 

Printing and publishing said business was difficult; property development was very bleak; non-residential real estate tenants were reluctant to commit though investor interest was improving and residential real estate reported a significant shortage of listings with multiple offers and properties selling quickly.

Retail was still weak while tourism and travel were getting weaker and worrying about the coming year. 

There were small increases in transport and storage but overall the sector was weak and the vehicle and automotive sector was still weak.

Confidence up, OCR down


The National Bank Business Confidence survey  showed an improvement in March, the largest in nine years.

But while a net 15% now expect a deterioration in business conditions, down from a net 39% in February, it’s still more a case of things not being so bad rather than being good.


There is a similar message from Reserve Bank Governor Alan Bollard:

“We expect the large decline in the OCR over the past year to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. This, together with the stimulus from fiscal policy, will act to support the New Zealand economy and eventually see activity trough and pick up thereafter. However, the scale of the global financial crisis and domestic adjustments underway are such that it is likely to be some time before economic activity returns to robust and healthy levels.

 His comments accompanied his announcement that the Official Cash Rate has been reduced by 50 basis points to 2.5%. I think that’s around the rate when my parents bought their first house in the mid 1950s.

But it’s not just another fall in the OCR that’s significnat, it’s Bollard’s statement that he expects the rate to be at this level or “modestly lower”  until the latter part of next year.

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