National Bank Business Outlook Survey

Data Flash (New Zealand)NBNZ Business Survey - March 2000

National Bank Business Outlook Survey
Mar-00 Feb-00
Dec-99
Business Confidence +27 +21 +21
Activity Outlook +37 +38 +35
Exports +40 +43 +38
Investment +16 +16 +11
Capacity Utilisation +30 +25 +23
Profits +21 +18 +17
Pricing Intentions +30 +26 +24
Inflation Expectations +2.5 +2.4 +2.6
Source: DB Global Markets Research, NBNZ

Key facts

* General business confidence increased to +27% (net respondents) in
March. A key driver was a sharp improvement in optimism in the
agricultural sector - up to +35 from +11 in February. This was only
partly offset by a decline in confidence in the construction sector
(down to +21 from +28 in February).

* Firms' optimism about their own prospects over the year ahead was
virtually unchanged, with +37% expecting good times ahead. Optimism
regarding prospects for exports and investment was down marginally.
However, expectations regarding employment intentions and
profitability were up slightly.

* Significantly, the net share of businesses who intend to raise
prices over coming months has risen to record levels. A net 30% of
firms expect to increase prices, up from 26% in the February survey.
Expectations for CPI inflation over the next year increased to 2.5%
from 2.4% in February.

Commentary

The survey is consistent with our forecast of GDP growth of around
4% over the next year, driven by strong export growth and solid
levels of investment and consumer demand. Pricing intentions
continue to be consistent with rising cost pressure associated with
a tightening labour market, higher energy prices and increases in
import prices due to higher commodity prices and the low NZD. The
RBNZ will have taken little comfort from this survey which adds
incrementally to the growing weight of evidence suggesting that its
March MPS medium-term inflation projections were too optimistic.

Darren Gibbs, Senior Economist, New Zealand (64) 9 351 1376

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