N.Z. Business Confidence Surges to 15-Month High; Kiwi Gains

New Zealand business confidence surged to the highest in five quarters, a private survey showed, sending the nation’s currency higher on signs of faster economic growth this year.

A net 20 percent of 767 companies surveyed last quarter said they expect the economy to improve in the next six months, the most since the third quarter of 2011, the New Zealand Institute of Economic Research Inc. said today in Wellington. The net figure subtracts pessimists from optimists. More firms expect their sales will improve in the three months to March.

Stronger profits and a pickup in the housing market indicate domestic spending will accelerate in 2013 as signs of a recovery in China help spur global demand for exports. New Zealand’s dollar gained as investors increase bets that central bank Governor Graeme Wheeler will start raising interest rates this year.

“It’s a nice finish to 2012,” Shamubeel Eaqub, principal economist at the institute, told reporters. “There is a much sturdier base for the economic recovery.”

The so-called kiwi rose as high as 84.41 U.S. cents compared with 84.05 cents before the report was released. It bought 84.16 cents at 3:55 p.m. in Wellington, and is up 1.6 percent this year, the best performer among the Group of 10 currencies tracked by Bloomberg.

After adjusting for seasonal trends, confidence improved to the best level since mid-2007, the institute said. An indicator of domestic trading activity in the fourth quarter also rose to the highest in more than five years.

Sentiment Turnaround

Based on those readings, annual economic growth probably improved to 2.3 percent in the year through December from a 2 percent pace in the September, Eaqub said.

House prices rose 6.7 percent in 2012, the Real Estate Institute of New Zealand Inc. said in an e-mailed report today. There were 74,000 houses sold, the most since 2007.

Wheeler said in December he would monitor the housing market and was prepared to raise rates if property price rises fanned spending and borrowing.

“We continue to doubt the durability of the housing market recovery without a supportive labor market backdrop,” Mark Smith, senior economist at ANZ Bank New Zealand Ltd. in Wellington, said in an e-mailed note. “With the New Zealand dollar already in the stratosphere, the RBNZ is likely to shy away from cash rate hikes.”

RBNZ Outlook

Eight of 16 economists surveyed last month by Bloomberg News forecast a rate rise this year. Eaqub predicts Wheeler will keep the official cash rate at a record-low 2.5 percent until 2014, saying the central bank should wait for clear evidence that inflation has picked before tightening monetary policy.

A Jan. 18 report will probably show consumer prices rose 1.2 percent last year, according to the median forecast of 10 economists. The central bank on Dec. 6 forecast inflation will accelerate to 1.6 percent by the end of this year and 1.8 percent by late 2014.

New Zealand’s jobless rate was a 13-year high of 7.3 percent in the third quarter. Hiring intentions remain weak, the NZIER said in today’s report.

Economists monitor the NZIER’s measurement of labor shortages, pricing intentions and factory capacity to gauge whether inflation pressures will emerge.

A net 20 percent of companies said it is harder to find skilled workers, little changed from 21 percent in the previous survey, today’s report showed. A net 9 percent plan to raise prices over the next three months, it showed.

“We’re not seeing anything on inflation that makes us particularly concerned,” Eaqub said. “There are no urgent implications here for the Reserve Bank.”

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