31 Jul 2013

Business confidence surges

7:13 pm on 31 July 2013

Business confidence has surged to a 14 year high, led by the construction sector.

ANZ's monthly gauge of business sentiment shows optimists outnumber pessimists, with a net 53% of firms expecting economic conditions to improve in the coming year, compared with a net 50% expecting better times ahead in the previous survey.

ANZ says the construction industry expects its golden run to continue, led by housing booms in Christchurch and Auckland.

The survey indicates the economy will grow 3.9% by the end of the year, but ANZ chief economist Cameron Bagrie says that appears far too optimistic.

Mr Bagrie warns inflation expectations are growing, while a third of firms expect to raise their prices in the next year.

But he says confidence is broadening beyond the construction booms in Christchurch and Auckland, and it indicates the economy is set to grow further.

Mr Bagrie says when confidence is sustained and elevated for a reasonable period, it tends to become self-fulfilling.

Investor confidence down

Investor confidence meanwhile has fallen from its highest point in two years, according to the second quarter ASB Investor Confidence Survey.

The ASB Index fell by 7 points, from a net high of 18% in the previous quarter, to 11% in the 3 months to June.

ASB Wealth Manager, Jonathan Beale, says the fall in confidence was surprising.

Although he says analysis of the figures suggests the fall was related to global events, particularly in Europe over the three months of the survey.

The share market remains buoyant with the most recent survey showing people remain confident about the returns they're getting from their New Zealand shares.

Although Mr Beale says that is driven by people looking for yield with term deposit rates being so low and New Zealand shares providing relatively attractive returns.