Weak Kiwi works magic, boosts confidence

Lower New Zealand Dollar, coupled with aggressive easing by Reserve Bank of New Zealand have worked its magic boosting confidence.

• Business confidence rose into positive for first time since June and according to ANZ 10% of businesses are optimistic about general economy, which is a large turnaround from 19% businesses showing pessimism in last survey.
   
• Moreover, confidence boost have been quite broad based. Firms' own activity expectations rose 7 points to +24. Profit expectations increased from +6 to +13 and investment intentions rose 5 points to +12. Employment intentions rose from +3 to +12. Residential investment intentions lifted sharply from +29 to + construction intentions improved from -4 to +21.
   
• With weak New Zealand Dollar, export intentions have moved higher to +22.

Though, Agricultural activity outlook still in red, higher dairy price, which is up close to 50% from August lows has boosted confidence.

Moreover ANZ point out that New Zealand economy is beyond dairy and its largest GDP contributor services sector growth has actually solidified, along with improvement in construction sector. Services sector business confidence is standing at +18.3, above average and outlook at +33.

However, recovery is still weak and key challenge would be to maintain the rebound momentum. Strong Kiwi since September, could very well derail it since weak Kiwi has been key factor.

According to ANZ, weak Kiwi has not only eased pain of agricultural namely dairy exporters, it has helped to improve tourism business, services export and inflows into construction sector.

New Zealand Dollar got a boost from the report trading at 0.676 against Dollar.