NZ: Business confidence rebounds - Westpac

Anne Boniface, senior economist at Westpac, notes that New Zealand’s business confidence rebounded from a nine year low in the December quarter even as confidence remains at historically low levels and continues to suggest downside risk to Westpac’s near-term GDP growth forecasts.

Key Quotes

“Beneath the headline, key indicators of firms’ own activity also improved in the December quarter. But rising costs and limited pricing power continue to eat into firms’ profit margins.”

“Plant and machinery investment intentions improved further in December, consistent with our view that the recent downturn in business investment is likely to be temporary.”

“Today’s survey should further assuage the RBNZ’s concerns that weak confidence presents a downside risk to the growth outlook. Consequently, it has done nothing to change our outlook for the OCR. Our central view remains that the next move in interest rates will be up, but this isn’t on the cards for some time yet.”