The New Zealand Institute of Economic Research quarterly survey of business opinion showed the recovery was broadening from Canterbury and Auckland to other regions. Businesses were optimistic and were hiring and investing more. Business optimism had risen over the past three months, net optimists rising from 19% to 32%, which was the highest level of optimists since March 2010.
Domestic trading activity, which NZIER principal economist Shamubeel Eaqub said was a good indicator of economic growth, inched up from an already strong 10% in December to 11% - the strongest reading since June 2007.
The survey did not directly survey the agricultural sector, so did not incorporate the impact of the drought. But the survey included suppliers to the sector, such as fertiliser sellers, and users of agricultural products, such as food manufacturers. It still presented a reliable indicator of the state of the economy, Mr Eaqub said.
''There are encouraging signs of a broadening and strengthening economic recovery across regions and industries. Businesses are hiring and investing more. This is the most broad-based strength seen in the survey since the recession began in 2008.''
The survey showed firms were barely raising prices, consistent with official inflation remaining low. There were some capacity pressures, but those were mainly concentrated in Canterbury, he said.
Exporters also reported tighter capacity. That might be related to fast-tracked meat processing because of the drought, Mr Eaqub said.
ANZ senior economist Mark Smith said the details of the NZIER survey suggested the economy was likely to maintain a solid pace this year.
''However, in our view, the growth mix depicted in the survey - and by other indicators - does not look durable.''
One of the casualties of the recent expansion in economic activity had been the employment outlook, he said. The March data saw employment intentions in positive territory and with a more positive, but guarded, assessment for employment intentions. While those results were encouraging, a sustained recovery in employment remained the missing link to a concerted economic expansion taking place, Mr Smith said.
The quarterly survey signalled a solid pace of economic expansion in the first half of the year, but the outlook was for an unbalanced recovery, underpinned by strengthening domestic demand.
''With the New Zealand dollar flirting with post-float highs and the drought set to weigh on agricultural production over 23013, economic imbalances look set to widen further.''
Such an outlook was running against the structural requirement of the economy to rebalance. With the Reserve Bank warning it would not stand by and let a consumption boom unfold, changes to prudential policy looked likely, he said.
The ANZ continued to forecast that the next move for the official cash rate would be up. A guarded labour market outlook, drought, the higher dollar and a still-wobbly global scene would mitigate the effective impetus provided by low interest rates and rising commodity prices.
But with a benign inflation starting point, time was on the Reserve Bank's side and the central bank remained in no hurry, Mr Smith said.
