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NZ business confidence gains in February as agri sector gets more upbeat

27 Feb 15

New Zealand business confidence improved in February as recent gains in dairy prices turned sentiment around in the agriculture sector, and as low interest rates stoke hiring and investment expectations.

A net 34.4 percent of firms are optimistic about the general economy, up from 30.4 in the previous survey, according to the ANZ Business Outlook. That was aided by a turnaround in agriculture to a net 15.2 percent becoming optimistic, having previously been dominated by pessimists. Firms' own activity outlook showed a net 40.9 percent of respondents upbeat on their prospects, compared to 37.3 percent.

"General confidence, profit expectations and employment intentions in this sector (agriculture) have flipped from negative to positive," ANZ Bank New Zealand chief economist Cameron Bagrie said in his report. "Higher dairy prices are no doubt working their magic. Such a bounce-back is particularly welcome considering challenges delivered by Mother Nature."

Last month, the New Zealand Institute of Economic Research's quarterly survey of business opinion showed firms remained optimistic about the country's economic outlook, even as tepid inflation caused more concern about profitability.

Today's ANZ survey showed a net 28.1 percent of respondents are picking profits to improve compared to a net 20.6 percent in the previous survey, with a net 23.4 percent intending to raise prices, up from 20 percent. One year ahead inflation expectations slowed to 1.72 percent from 2.13 percent.

Investment intentions increased to a net 22 percent from 20.2 percent, and hiring intentions increased to 23.3 percent from 19.9 percent.

The prospect of low interest rates continuing, and increasing competition by banks to secure business customers saw a net 27.3 percent of respondents expecting access to credit becoming easier, up from 15.6 percent. A net 23.3 percent of respondents see interest rates going lower, compared to a net 12.7 percent seeing a rise in the previous survey.

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