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NBNZ Business Confidence (March)

Data Flash (New Zealand)

NBNZ Business Confidence (March)

Key points

Headline business confidence was broadly unchanged at +30 (net respondents) in March compared with +31 in February. However, in seasonally adjusted terms, confidence rose to +25 from +15 last month. Confidence appears strongest in the service sector of the economy.

Firms' assessment of their own activity prospects rose a further 3 points to +41 (to +34 in seasonally adjusted terms). The level of this index is consistent with economic growth of between 3 to 4% over the next year. Most of the other real economic activity indicators captured in the survey also improved. Reflecting negative global economic news, export prospects declined 4 points from +41 to +37 but the level of the index remains very high, at least in part reflecting the offsetting impact of a very stimulatory real exchange rate.

Pricing intentions and inflation expectations were little changed from last month and are still at levels that suggest significant further price pressure over the next 12 months, particularly in the retail sector.


The latest NBNZ survey, coming on top of yesterday's bullish WestpacTrust consumer confidence survey, further highlights the divergence in current economic fortunes in New Zealand versus those abroad. We would be surprised if the global slowdown did not moderate domestic confidence levels to some degree over coming months. However, we remain of the view that the New Zealand economy is well placed to grow at or around potential growth levels (which we assess as being no higher than 2.5%p.a.). Thus we anticipate only one further easing by the RBNZ in the current cycle - a 25bp cut in May.

Darren Gibbs, Senior Economist, New Zealand

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