NZ economy: surge in confidence

September 3, 2009

A surge in business confidence shows the NZ economy has turned a corner and is on its way out of recession, says ANZ National Bank chief economist Cameron Bagrie. The bank revealed a major boost in its August monthly business survey with a net 34 per cent of firms believing general business conditions were picking up - a leap from the net 16 per cent in July. "The big message is we have got an economy that has turned the corner." While optimism in residential construction was particularly strong with a net 47.6 per cent feeling positive, Bagrie said all sectors were showing signs of recovery. "Housing is at the forefront of the recovery and being a key part of the New Zealand psyche it has a ripple effect." Businesses were also confident about their own activities - a measure seen as being a more reliable indicator. A net 26 per cent were positive about the future, up from a net 13 per cent last month. The figure is close to being a five year high although the long-term historical average for the indicator is a net 25 per cent positive. Bagrie said that indicated potential GDP growth of 3 per cent over the next year although a composite index showed it was likely to be closer to 1.5 to 2 per cent. Profit expectations also returned to the black with a net 1 per cent expecting to make a real profit. The commercial construction sector was the only area where confidence had dropped in the past month. Bagrie said this sector tended to lag the economic cycle and was usually the last area to come back up when the economy began recovering. ASB economist Jane Turner said the survey pointed to a growing economy in either the third or fourth quarter of this year reinforcing the belief that the recession was over.