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NZ business confidence climbs for 3rd month

NZ business confidence climbs for 3rd month on high commodity export prices

By Paul McBeth

June 30 (BusinessDesk) – New Zealand business confidence gained for a third month as the rural sector starts seeing money flow in on the record-high commodity prices producers are enjoying.

Confidence rose to a net 46.5% of firms picking better times in June from a net 38.3% in May, according to the National Bank Business Outlook. That’s the most upbeat they’ve since before the September earthquake last year. Firms’ expectations for their own activity slipped to a net 38.7% this month from 39.7%.

The kiwi dollar rose as high as 82.92 U.S. cents from 82.78 cents immediately before the release, and recently traded at 82.85 cents.

“Business confidence continues to hold out the alluring prospect of better times for the economy,” chief economist Cameron Bagrie said in his report. “The rural regions are riding the massive terms of trade boost the economy is benefiting from, and we’re starting to see chequebooks open.”

New Zealand exporters of locally-produced commodities have been benefitting from record high prices for raw materials, and are expected to start spending again once they’ve repaid debt accrued over the past decade.

A net 30.8% of surveyed respondents expect export growth, up from 28.2% in May, and a net 16.4% are upbeat about the ease to get credit, compared to 12.8% a month ago.

That hasn’t fed into increased profit expectations, which fell to a net 19.6% from 23.1% last month, and pricing intentions dropped to 26.5% from 34.2%.

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Companies are also more pessimistic about the labour market, with employment intentions down to 10.4% in June from 12.6% a month ago.

Firms’ expect inflation to be about 3.2% in a year’s time, down from an expected 3.3% a month ago. Bagrie said second-round pricing risks aren’t manifesting from the high headline inflation number, which was jacked up by two percentage points from the government’s increase in consumption tax last year.

The construction sector showed a marked improvement, with a net 48.5% picking increased residential activity, from 33.4% in May, and a net 31.4% expecting more commercial building, up from 20.7%.

(BusinessDesk)

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