New Zealand ANZBO business confidence rose sharply in October

October saw a strong increase in business confidence, with the net number of businesses expecting good times over the coming year rising to 10.5%. That's up sharply from September when the majority of businesses were expecting economic conditions to deteriorate. There were strong gains in confidence across all sector of the economy.  

A key reason for the improvement in business confidence is likely to be recent increases in dairy prices (though the agricultural sector is still facing some significant challenges, including the deepening El Niño conditions).

While today's result is clearly a positive development, it's important to put October's pick-up in context. It follows sharp falls earlier in the year, and leaves confidence at relatively low levels. In fact, despite picking up in October, businesses' expectations for activity in their own firms remains well down on levels seen earlier in the year. Activity expectations point to GDP growth of around 2%. That's not dire, but it is a marked slowdown from the 3%+ rates of growth we saw over the past year. That will be very noticeable, especially in the labour market.

Businesses continue to expect low levels of inflation. And despite improved expectations for activity, the number of businesses planning on increasing their prices was virtually unchanged this month.