QSBO like the working man’s pancake

As recoveries go, the Quarterly Survey of Business Opinion (QSBO) has elements of a working man's pancake - nutritional enough, but rather flat, says BNZ.  

Wednesday, April 7th 2010, 12:33PM

In Markets Outlook, it says the QSBO released yesterday had expectations consistent with a firming recovery. Investment is looking good and pricing intentions are off lows.

But broader activity measures are dragging the chain which increases the odds of the Reserve Bank delaying the first Official Cash Rate (OCR) hike until July.

"QSBO reports of what firms expected to occur in the said period have been undershot again."

BNZ says looking back at previous surveys, respondents had expected net positive trading results for 2009 Q4 (+16) and 2010 Q1 (+10) but have reported results of -10 and -5 respectively.

"These misses are relatively high in a historical context, reinforcing the sense of early stumbling at the high hurdles."

Taking this into account BNZ is picking 0.4% GDP for 2010 Q1 rather than the 0.9% expansion the Reserve Bank is estimating.

The Deutsche Bank data flash says in its view the QSBO points to an economy that is on course to grow about 3 - 4% year on year, a decent performance but as widely expected, more muted than during past recoveries.

Westpac Weekly Commentary says the QSBO supports its pick for 1% growth in March quarter GDP and the Reserve Bank's forecast of 0.9%.

"To some degree our forecasts reflect the much vaunted rebalancing of the economy, although it seems to be driven more by circumstances than by ‘good behaviour' on the part of households."

Westpac says given time, continued low interest rates would encourage a return to the borrow-and-spend behavior of the last cycle, "hence the need for the Reserve Bank to start returning the cash rate to more normal levels soon".

ANZ Market Focus says high levels of business confidence and rebounding consent issuance point to ongoing recovery prospects which it takes heart from, but conversely, credit growth figures continue to point to an economy that is deleveraging.

"We continue to portray this paradox as consistent with an economy that is tepidly recovering, but the timing in terms of strong growth is expected to be late 2010, early 2011, the QSBO is consistent with this message."

ASB Business Weekly says despite the gap between expectations and reality the QSBO still suggests an ongoing recovery with investment and employment intentions are now tracking above the survey's historical average.

J P Morgan Weekly Prospects says the QSBO told a similar tale to last week's NBNZ business confidence survey with sentiment deteriorating modestly over March, it believes the first OCR rate hike will be in July.

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