New Zealand business sentiment rebounds in September, remains weak relative to growth outlook

New Zealand business sentiment rebounded in September. The confidence index rose to -38.3 from -50.3 seen in the prior month. The business confidence bounced after falling for six consecutive months. Most of the survey components rebounded in the month including firms’ expectations of their own activity. This measure is mainly correlated with GDP outturns and rose to 7.8 from 3.8. Investment intentions was the main exception, softening further in the month.

While the New Zealand economy’s growth rate has decelerated in the past year, the fall in business sentiment has been much larger. One of the reasons for the softness might have been companies’ unhappiness with some of the new Government’s policies, especially in planned changes to labor laws, stated Westpac in a research report.

Measures of inflation in the survey came in mixed. In spite of the rising petrol prices, inflation expectations dropped a bit and have fallen from their recent high of 2.29 percent in June to 2.12 percent in September. Nevertheless, pricing intention rose slightly, reaching their highest level since November 2016.

While business sentiment has rebounded, it continues to be weak as compared to the growth outlook.

At 11:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was neutral at 21.4395, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 143.678. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex