Tourism and migration boost business confidence to six-month high

New Zealand business confidence rose to a six-month high in November, signalling a pick-up in the economy.

A net 14.5% of businesses were confident about the general outlook for the economy over the coming year, up from 10.5% last month, the ANZ Business Outlook survey reveals.

A net 32% of firms see their own activity expanding in the coming year, up from a net 23.7% in October.

While the New Zealand economy is being weighed down by slower housing markets in Auckland and Christchurch, a surplus of labour and low prices for dairy products, it is being bolstered by record tourism and migration, wider housing market strength outside of Auckland, and a lower New Zealand dollar, according to the ANZ Bank.

The bank is the only one of its 14 peers polled by Reuters that doesn't expect the Reserve Bank to cut interest rates next month.

"Our composite growth indicator (which combines sentiment measures from both business and consumers) is flagging the potential for GDP growth of north of 3%," ANZ New Zealand chief economist Cameron Bagrie says.

"After a half-year hiatus, it's pretty clear the economy is starting to pick up again."

The service sector is the most optimistic, with confidence in the outlook for the economy improving to a net 26.7 % from 18.3% last month.

Agriculture recorded the worst reading with a net 12.5% of firms pessimistic about the outlook, although sentiment had improved from the 20.5% that were pessimistic last month.

Optimism improved in the construction sector, with a net 23.5% of firms optimistic about the economic outlook, up from 5.7% last month.

Meanwhile sentiment weakened for the retail sector, with a net 12.7% optimistic, down from 14.1% last month, while manufacturing firms were equally split between pessimism and optimism, down from a net 9.1% who were optimistic last month.

Profit expectations across the survey improved, with a net 14.9% expecting an uptick in profitability, ahead of the 12.7% last month.

Investment intentions also rose, with a net 14.6% expecting to make further investments in their businesses, up from 12% last month.

Employment intentions improved, with a net 13.5% expecting to hire more workers, up from 12.1% last month, and export intentions nudged higher to 22.8% from 22.4%.

Commercial construction intentions improved to 37.5% from 20.7%, while residential construction expectations slipped to 23.1% from 38.7%.

(BusinessDesk)