Deutsche Bank: NBNZ Business Outlook Survey - Oct
Economic Note (New Zealand)
NZ: NBNZ Business Outlook Survey - October 1999
The NBNZ business confidence index remained unchanged in October, with a net +17% of respondents expecting conditions to improve over the next twelve months.
Consistent with the consolidation in the business sentiment, respondents' expectations for exports and their own business activity remained stable at relatively high levels. Moreover, investment intentions, profitability expectations and capacity utilisation were broadly unchanged from last month's outturns.
On the inflation front, pricing intentions moved up sharply to the highest level in four and a half years, with a net 21% of respondents intending to raise prices, while annual inflation expectations edged up to 2.2%.
With most confidence and activity indicators in the NBNZ survey remaining broadly unchanged from last month's levels, this provides further support to the contention that the decline in June quarter GDP was an aberration. The major news in this month's release has been the sharp rise in pricing pressures. In particular, evidence from both the NBNZ and QSBO business surveys now clearly indicates that expectations are rapidly responding to actual inflation developments (i.e. rises in petrol, electricity and car prices and local authority rates). This will be of some concern for the RBNZ, and reinforces our expectation that the Bank will raise the OCR by 50bp at the 17 November MPS.
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