Light at end of economic tunnel

The BNZ’s chief economist Tony Alexander measured the mood of more than 25,000 readers of his Weekly Overview week ago. He found sharp rebound in sentiment: net 14% of respondents expect the economy to be better in year’s time compared with net 21% expecting deterioration month ago, result clearly reflecting the shock impact of the February 22 earthquake. This dragged confidence down from net 22% positive at the start of February.

“This recovery is welcome and reassuring development because it suggests we will soon see improved business investment and hiring that will deliver the expected improvement in economic growth we are forecasting for later this year,” Alexander comments.

But some sectors are thriving while others are struggling, the survey found. Forestry and agriculture are strong on the back of high export prices but retailing is still weak, manufacturing for the domestic market continues to struggle though for export it is strong. Little upturn is yet apparent in legal offices, although accountants are slightly less gloomy than in previous months.

Alexander says his data show the shock that followed February 22 was temporary and suggests some improvement has probably occurred in business employment and investment intentions.

At the end of March, the National Bank Business Outlook survey showed a steep plunge in confidence in the aftermath of the quake. net 8.7% of businesses expected worse times for the economy over the coming year, compared to net 34.5% in February expecting better times. Less extremely (and better fix on what is actually happening), net 14.7% expected better times for their own business over the year ahead, compared to net 36.6% in February.

The NZIER’s Quarterly Survey of Business Opinion, measuring confidence over the March quarter, similarly found businesses more gloomy about the future after the earthquake. But there were regional differences on activity measures: trading activity continued to contract in earthquake-affected Canterbury, while the rest of New Zealand slowed modestly.

Yet another survey shows confidence depends on what sector(s) is being measured. The latest RaboDirect Financial Confidence Index shows public confidence in the financial sector is at its lowest level since the index was launched in August 2009, at the height of the recession.



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