(Bloomberg) -- New Zealand business confidence surged to a 10-year high in August after the central bank began cutting interest rates, according to an ANZ Bank survey. The kiwi jumped.
A net 50.6% of respondents expect the economy to improve in the next year, up from 27.1% in July, ANZ said Thursday in Wellington. That’s the highest reading since May 2014. A gauge of how businesses view their own activity climbed to a seven-year high.
The Reserve Bank cut the Official Cash Rate on Aug. 14 — much earlier than it had previously signaled — saying a slowing economy had made it more certain that inflation would return to target. In the lead up to the decision, investors were betting policymakers would cut rates soon amid increasing expectations globally that the Federal Reserve was also close to easing.
“Things are definitely looking up, albeit from a pretty dark place for many firms,” ANZ said.
The New Zealand dollar extended gains after the report and was up 0.8% to 62.93 US cents at 4:40 p.m. in Wellington, the highest since Jan. 1.
Responses to ANZ’s survey received before the rate cut were already showing increases in confidence and activity expectations, it said, adding the roughly one third of responses that came in after the RBNZ’s decision didn’t change the results a great deal.
“The lift was already evident in the early-month responses well before the RBNZ cut the Official Cash Rate, though increasing anticipation of that happy, happy day undoubtedly played a part,” ANZ said. “Wholesale interest rates dropped steadily over July and into August as economic data deteriorated and economists brought forward their forecasts of when the RBNZ would reduce the OCR.”
Today’s survey showed inflation expectations fell below 3% for the first time since mid-2021 although pricing intentions increased, with a net 41% of firms intending to raise prices in the next three months.
(Updates currency move)
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