NZ dollar jumps on upbeat business survey

National Bank chief economist Cameron Bagrie Photo / Mark Mitchell

The New Zealand dollar rose to as high as 82.5 US cents - a new record post-float high - after a National Bank Survey showed a big jump in business confidence in May from April.

In the National Bank's Business Outlook Survey, the general measure of business confidence rose from a net 14.2 per cent of respondents expecting better times in the next year in April, to a net 38.3 per cent in May.

Gains in the past two months have now more than reversed the drop seen in the wake of the February 22 earthquake.

The survey shows 34 per cent of businesses polled plan to raise prices this year, up from 27.8 per cent in April, suggesting inflationary pressures are set to re-emerge in the New Zealand economy. Inflation expectations rose to 3.3 per cent in the latest survey, from 3.04 per cent last month.

The kiwi dollar jumped to 82.55 US cents, the highest level since the currency was allowed to trade freely in March 1985.

"This indicator is firmly pointing up," said Cameron Bagrie, chief economist at National Bank.

"Time and again business confidence surveys have proven adept at picking turning points in the business cycle."

Still, Bagrie said a year ago the confidence indicator was also pointing to recovery that failed to eventuate and the latest survey should be read alongside other indicators.

A net 39.7 per cent of firms see their own activity rising, up from 29.5 per cent in April, and net investment intentions rose to 14.8 per cent from 6.1 per cent, the survey showed.

Those expecting to take on workers rose to 12.6 per cent from 5.9 per cent.

Businesses noting an improvement in ease of credit rose to 12.8 per cent from last month's 5.4 per cent.

Of those polled, 23.1 per cent see higher profits over the next 12months, from 7.5 per cent last month.

Residential construction was among the few indicators to decline, with a net 33 per cent expecting to increase activity, down from 48.4 per cent in April.

Those expecting export growth were little changed at 28.2 per cent from 28.6 per cent.

- INTEREST.CO.NZ / BusinessDesk