September business confidence has bounced back after five consecutive months of falls but it is too early for complacency.
The Reserve Bank will remain wary and is still expected to cut the official cash rate by another 0.25% later this month.
The ANZ Business Outlook survey, released yesterday, showed a net 19% of businesses remained pessimistic about the economy but after the five previous substantial declines, the turnaround is welcome.
The release of the ANZ survey was awaited anxiously as confidence has been fragile throughout the New Zealand winter.
Latest employment confidence figures from Westpac showed workers gloomy about their wage rise prospects, something which may hurt retailers before the Christmas spending season.
Confidence in the dairy sector reached new lows after Fonterra cut its forecast payout. Some confidence may be now returning after successive rises in GlobalDairyTrade auction prices, thanks mainly to the dairy co operative holding back on products put up for auction.
Confidence plays a major role in the economic activity of the nation. In the past, successive governments have been criticised as New Zealand's economy has been driven domestically.
People used rising house prices to borrow against their assets to buy large ticket items, such as new cars, boats, larger houses and new appliances.
When interest rates rose, people cut back their spending - not always by choice - lowering confidence, with the result of retailers finding it harder to make a dollar.
Now the Government is under fire for not focusing on an export led recovery, despite the associated problems such as the previously high New Zealand dollar which was being moved at the whim of overseas investors.
ANZ senior economist Philip Borkin said the recoil in confidence was apparent across the broad results and, importantly, in key survey indicators more closely correlating to economic growth.
Firms' own activity expectations rose five points to 17. Less downbeat agriculture sentiment, along with solid improvements in construction and manufacturing, led the lift.
Profit expectations were back in black. Retailers and agricultural firms expected lower profits. But manufacturing, construction and service sector firms expected stronger results.
Investment intentions rose seven points to seven. Gains were widespread across sectors but they were still negative for construction and agricultural firms.
Employment intentions were unchanged at three and export intentions nudged higher, he said.
Residential investment intentions lifted sharply from 12 to 29 and commercial construction intentions improved, but remained mildly in the red.
''The uplifts themselves are hardly anything to crow about. Movements were at the margin, particularly when we allow for the mild impact of seasonality. It's normal to feel a bit more chipper as winter begins to fade.''
A detailed review of the survey showed respondents were well aware of the economic risks and challenges. There were no rose tinted glasses.
There were enough factors to keep businesses wary. They included uncertainty over China, a possible El Nino event, uncertainty over the dairy price outlook and the path for the Auckland property market.
Mr Borkin said while caution was evident, it was far from panic stations. Caution was natural when the economic weather looked murkier but closing the shutters was not always helpful.
Hiring and investment intentions were soft but more consistent with maintaining the status quo than shedding staff or cutting back on spending aggressively, he said.
''Pro cyclical forces matter. It's hard to go past recent lifts in both dairy prices and building consents as offering the allure of better times ahead - or at least less negative ones across the rural scene.''
At a glance
Business confidence bounces back after five consecutive months of falls.
Businesses still pessimistic about the general economy, with agriculture remaining the most pessimistic.
The start of spring could herald the start of increased confidence.
Reserve Bank will remain wary of business sentiment.
