New Zealand Business Confidence Jumps to 10-Year High

Oct. 6 (Bloomberg) -- New Zealand business confidence jumped to a 10-year high as the domestic recession ended and signs emerged of a recovery in the world’s largest economies.

A net 36 percent of companies surveyed last quarter expect the economy will improve over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That compares with 25 percent that forecast a deterioration in the second quarter. The net is calculated by subtracting the pessimists from optimists.

New Zealand’s economy expanded 0.1 percent in the three months to June, the first growth in six quarters, ending the worst recession in three decades. Reserve Bank Governor Alan Bollard last month said he will keep borrowing costs at a record low until late 2010 to help stimulate spending and investment.

“The worst of the recession is over,” Shamubeel Eaqub, principal economist at the institute, told reporters today. “The steepness of the recovery path is still very uncertain.”

The International Monetary Fund last week said New Zealand’s economy will shrink 2.2 percent this year and grow 2.2 percent in 2010. Finance Minister Bill English yesterday said the economy could contract again if the global recovery falters.

Bollard has kept the benchmark interest rate at a record low 2.5 percent since April. Eleven of 12 economists surveyed by Bloomberg News expect the rate will be unchanged until at least March 31. One predicts a quarter-point increase in the first quarter.

Profit Outlook

New Zealand businesses reported a decline in sales in the third quarter, but expect earnings will increase in the fourth quarter, according to today’s survey.

A net 20 percent of companies said trading fell in the three months ended Sept. 30. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those recording a drop.

A net 17 percent expect trading will increase in the fourth quarter. A net 3 percent say profits will decline.

“There is a considerable disparity between expectations and reality,” said Eaqub. “While firms are more confident about the economic outlook, their recent performance has been weak and they remain cautious about hiring more staff or lifting investment.”

A net 8 percent for firms expect to invest less in plant and machinery, down from 23 percent in the previous survey.

A net 25 percent of companies said it is easier to find skilled workers, today’s survey showed. Those expecting to fire workers in the next three months equaled those expecting to hire.

Capacity utilization, a measure of factory usage, declined to 88.4 percent in the third quarter from 90.7 percent in the previous three months.