New Zealand's business confidence improved in March, with firms' optimism about their own activity rising to the highest level in seven months and inflation expectations edging higher, a survey showed on Thursday. The National Bank of NZ's monthly business outlook showed a net 38.8 percent of companies expect their own business to grow in the next 12 months, compared with a 31.2 percent optimism level in February.
The survey's headline measure of sentiment showed a net 33.8 percent of respondents expecting the economy to improve over the year ahead, compared with a net 28 percent optimism level in February.
"We're moving in the right direction in terms of underlying economic improvement and growth," said ANZ-National chief economist Cameron Bagrie. "However, this comes with a sting in the tail," he said, pointing to housing and construction that drove the lift in sentiment. Last month, the construction sector also led the pick-up, raising the risk of a housing-led spike in inflation.
"Getting growth is not the only game in town. We need the right mix," Bagrie said, as the survey's inflation expectations for the year ahead edged up to 2.76 percent from 2.68 percent in the previous month. Financial markets were unmoved by the survey, with the New Zealand dollar holding steady at $0.8180/90.
The survey showed similar lifts with employment, investment and profit expectations all rising, indicating a 4 percent year-on-year growth by the middle of the year, Bagrie said. The survey followed recent data - such as stronger consumer confidence and rising home prices - that have pointed to an improving outlook.
However, high unemployment, patchy local activity, benign inflation and global uncertainty are expected to see the RBNZ hold interest rates steady for most of this year, or even until early 2013. The central bank left its benchmark rate at a record low 2.5 percent this month citing low inflation and a high exchange rate.
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