New Zealand businessmen have recovered most of the confidence they lost in March as a result of the February Earthquake in Christ Church. According to the National Bank of New Zealand's business confidence survey, the optimists on the outlook over the next year have widen their margin over the pessimists. The net balance percentage between the two has risen 22.9 points in April and 24.1 points in May from the net balance of -8.7% in March and is now 38.3%, well above the long term average of 4.6%. The activity outlook that measures confidence in their own businesses is generally higher than confidence in the whole economy. Enough businessmen saw their own business improving over the next year in spite of the earthquake that the activity outlook remained positive, at 14.7%, in March and has since increased to levels that prevailed before the Earthquake and is now above its long term average of 20.7%. Business Confidence and the Activity Outlook are shown in the first chart.

The net balance has increased from April to May in most other areas surveyed. An exception is Residential Construction which has fallen from 48.4% in April to 33.4% in May. It remains, however, well above its long term average of 5.8%. The major areas surveyed are shown in the following table for the past five months--the survey is not taken in January.

Part of the increase in confidence may have been the result of the sharp increase in the trade balance that is shown in the second chart. Statistics New Zealand provides monthly trade data on a seasonally unadjusted basis and a trend adjusted basis. We have seasonally adjusted the unadjusted data , using the seasonal adjustment function in DLX. Although seasonal adjustment reduces the April balance from 1,113 million NZD to 677 million NZD, the seasonally adjusted figure in the highest on record in the past decade, as can be seen in the second chart.

While the rise in the trade balance may have been part of the reason for the increased confidence, it is likely that the rise in confidence has played a role in the recent rise of the New Zealand dollar . The third chart shows the daily value of the NZ$ over the past five years. It reached $.8187 today, exceeding the previous peak of $.8115 reached on March 17, 2008.