Business confidence in New Zealand showed the biggest improvement in April since December 2000, results of a survey showed Wednesday.

The survey by the National Bank revealed that firms' expectations regarding business conditions improved markedly in April, indicating a possible recovery in the economy, reversing from the midst of the sixth straight quarterly contraction in economic activity and the longest negative streak since the 1970s.

In April, only a net 14.5% of respondents expected business conditions to deteriorate over the next year compared to a net 39.3% in March. Firms' expectations about own activity showed a rise, with only a net 3.8% expecting activity levels to fall in the next 12 months compared to 21.2% in the previous month. There was also an increase in expectations on capacity utilizations, with only a net 4.3% forecasting capacity utilization to fall compared to 14% in the preceding month.

Moreover, there were also significant improvement seen in firms' investment intentions, profit and employment.

Investment intentions recovered from a record low in March, with the proportion of firms expecting to invest less in the year ahead moving down to 12.4% from 18.6%. However, it still remained the second lowest balance on record.

Profit expectations also showed some improvement, with only a net 29.5% of firms expecting a reduction in profits over the next one year versus 40.8% in March. Among the manufacturers, the net balance at minus 23 was the second lowest on record.

Export intentions of firms picked up in April, with a net 10.3% of firms expecting a rise in exports in the year ahead compared to only 2.1% in March. There was also an increase in the employment intentions, but it still remained in negative territory, with a net 19.1% of firm forecasting a decline in employment compared to 28.1% in March. The proportion of firms that expected the unemployment rate to have increased also moved down to 76.8% from 85.9%.

Meanwhile, pricing intentions of firms increased, with a net 17.6% firms expecting to raise prices over the year compared to only 9.2% in March. At the same time, inflation expectations also edged up to 2.73% from 2.63% in the previous month. But, they are not at alarming levels, as the rate remains well within the target band, the National Bank said.

The National Bank however, said its composite indicator still painted a dismal picture for growth prospects, but with a slight improvement over the previous month. The composite indicator moved up to minus 2 from minus 3 in March.

The bank said the recovery in the housing market, increasing dairy prices, tax cuts, along with a slowing global economy makes New Zealand a relatively attractive proposition for both the migrating and immigrating population, and was translating into a firming optimism or less pessimism towards the economy.

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