(Bloomberg) -- New Zealand business confidence rose to a fresh 10-year high in September as the prospect of further interest-rate cuts stoked optimism, according to an ANZ Bank survey.
A net 60.9% of respondents expect the economy to improve in the next year, up from 50.6% in August, ANZ said Monday in Wellington. That’s the highest reading since April 2014. A gauge of how businesses view their own activity climbed to the highest since mid-2014.
The Reserve Bank cut the Official Cash Rate on Aug. 14 — much earlier than it had previously signaled — and said it expects to continue to ease policy at a measured pace. Investors are betting the RBNZ could adopt a more aggressive stance either at next week’s rate decision or at the final meeting of the year in November.
“The economy’s response to lower interest rates could be more vigorous than is generally expected,” ANZ New Zealand Chief Economist Sharon Zollner said. “If confidence about the economic outlook continues to grow rather than petering out, that certainly raises the possibility that investment could recover more quickly than we or the Reserve Bank are anticipating.”
While the economy shrank 0.2% in the second quarter, that was less than the RBNZ expected. Most local economists continue to project a third-quarter contraction, tipping the economy into recession.
“A sharper rebound in economic activity than generally anticipated would of course be great news — as long as inflation still returns sustainably to target,” Zollner said.
Today’s survey showed inflation expectations were steady at 2.9% after falling below 3% in August for the first time since mid-2021, while cost expectations declined.
Still, pricing intentions increased for a third month, with a net 43% of firms intending to raise prices in the next three months. The average amount companies expect to raise prices by also increased.
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