RTTNews - Business confidence in New Zealand increased in May, as the proportion of firms optimistic about the economy outnumbered the pessimists, the latest survey from the National Bank showed Wednesday.

During the month, about 1.9% of firms expected business conditions to improve in the next 12 months compared to 14.5% forecasting a decline in the previous month. Expectations about own activity increased, with a net 3.8% expecting activity levels to rise compared to a net 3.8% expecting a drop in April.

However, export intentions dropped, with only 5.8% forecasting a rise in exports over the next year versus 10.3% in the previous month. Pricing intentions were also down, as only a net 12.4% thought they could raise prices compared to 17.6% in the previous month.

At the same time, investment intentions showed some improvement, with only a net 5.4% firms expecting to decrease investment activity compared to 12.4% in the preceding month. Profit expectations were also slightly better, with only a net 23.7% anticipating a fall over the next 12 months compared to 29.5% last month. Employment intentions improved slightly, with only a net 16% planning to reduce hiring over the year compared to 19.1% last month.

However, all three indicators continued to remain negative and below the Asian crisis levels, with the hiring expectations remaining in negative territory since February last year, the report said.

Meanwhile, a net 8.2% expect interest rates to decline over the next few months compared to 2.3% in April. Expectations about inflation moved down marginally, with 2.6% expecting inflation to pick up in the next few months versus 2.7% in April.

The National Bank pointed out 'green shoots' were emerging in the business confidence in May, after it followed a 'bungy-chord' dynamic in April. After such an extended period of decline it is only natural to expect a base to be forming across the economy or the pace of contraction to moderate.

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