The local data calendar has lately been dominated by confidence surveys, all of which have been notably positive.
The NBNZ business confidence survey rose sharply for the sixth straight month, with general business conditions reaching their highest since April 1999 and own-activity expectations the highest since June 2002. The latter measure is a useful indicator for contemporaneous GDP, and at face value the readings over the September quarter are consistent with growth in excess of 1% – this would be much stronger than our current forecast of 0.4% and a far cry from the RBNZ’s pick of 0.1%.
As we’ve seen in previous months, the details of the survey were less emphatic than the headline measures, more consistent with an economy in the early stages of recovery than one that’s roaring ahead. Employment intentions turned net positive (just) for the first time since March last year, but as yet aren’t sufficient to absorb the growth in the labour force. Profit expectations rose slightly to a net 7%, while investment intentions were broadly flat at a net 2%.
One important point to recognise – and one that will give the RBNZ a degree of comfort in its current stance – is that expectations of stronger activity are showing no sign of translating into expectations of higher prices. Inflation expectations and pricing intentions have eased sharply since the second half of 2008, and right now are close to the previous lows seen in 2003, when annual inflation was running below 2% (albeit for some temporary reasons).
