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NZ business confidence rises to 7-month high in March as agriculture sentiment lifts

31 Mar 2015

New Zealand business confidence rose to a seven-month high in March, led by improved sentiment in the agricultural sector.

A net 35.8 percent of firms are optimistic about the general economy, up from 34.4 percent last month, according to the ANZ Business Outlook. Agriculture improved the most, with a net 24.1 optimistic, up from 15.2 percent last month, which snapped six consecutive months of pessimism. Still, agriculture remained the least confident sector.

Higher rainfall, which pushed back the threat of widespread drought, and lifts in dairy prices helped buoy agricultural confidence this month. Still, recent declines in dairy prices could weigh on sentiment in the sector next month, ANZ said.

"Kinder weather (or should we say less intense drought conditions) and lifts in dairy prices over late February have been the elixirs," ANZ Bank New Zealand chief economist Cameron Bagrie said. "But the litmus test will come in April, given dairy prices are under renewed pressure."

Firms were more optimistic about their own outlook, with sentiment rising to a net 42.2 percent from 40.9 percent last month.

"Businesses remain very optimistic about their own prospects," Bagrie said. "That's what firms know best and it's therefore the real litmus test, with a strong correlation to GDP growth."

A net 30 percent expect their profits to improve, up from 28.1 percent last month, while firms' export intentions rose to an 11-month high of 32 percent from 23.7 percent last month

A net 28.3 percent expect to raise prices, up from 23.4 percent last month, while those expecting to increase investment rose to 24.8 percent from 22 percent, and those expecting to hire more staff slipped to 20.8 percent from 23.3 percent.

The construction sector was the most upbeat, with a net 50 percent optimistic, up from 39.4 percent last month. The outlook for commercial construction improved, while sentiment towards residential construction softened from its highs, ANZ said.

Inflation expectations were little changed at 1.76 percent from 1.72 percent.

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