Business signals end of New Zealand recession

July 30, 2009

New Zealand's business confidence continued to improve in July, leaping to its highest level in more than seven years and adding to the growing view that the domestic economy was starting to climb out of a protracted recession. The National Bank of New Zealand's Business Outlook survey, released today, reinforces expectations that the central bank has finished its easing cycle after a long period of aggressive rate cuts that ended last month. The report showed a net 18.7 per cent of businesses surveyed expect business conditions to improve over the next 12 months, compared with a net 5.5 per cent that expected an improvement in the June survey. The latest month marked the highest confidence level since March 2002.

Net confidence is defined as the percentage of optimists minus the percentage of pessimists.

A net 12.6 per cent of firms expect their own activity -- a key gauge of economic growth -- to improve, against 8.3 per cent expecting an improvement in June. This activity indicator in March plumbed a record low in the survey's 31-year history, but the recent improvement will support the growing view that the economy is slowly turning a corner.

"Our composite growth indicator -- which comprises own activity, profit, employment and investment expectations- - continues to improve and is flagging a potential return to positive growth," said Cameron Bagrie, chief economist at ANZ National Bank.

"Firms' own activity expectations have been flagging this for a couple of months, but we are now seeing signs of this broadening given less extreme readings from employment, profit and investment intentions.”

This (survey) is another piece of evidence that the recession appears to be over.