New Zealand Institute of Economic Research (Inc)
Media release, 4 July 2017
NZIER Quarterly Survey of Business Opinion
Embargoed until 10am 4 July 2017
The latest NZIER Quarterly Survey of Business Opinion shows business confidence remained steady in the June quarter. A net 18 percent of businesses expect better economic conditions over the coming months.
There was a slight softening in firms’ demand in their own business, with the proportion of businesses experiencing improved demand easing from 20 percent to 18 percent in June. Expectations for the next quarter also softened, with a net 23 percent expecting stronger demand ahead.
Activity and positive sentiment continue to broaden beyond Auckland, with Waikato, Bay of Plenty, Wellington, Gisborne and Southland experiencing the highest levels of business confidence.
Confidence easing in the building sector despite strong pipeline
Despite signs of a solid pipeline of construction activity, business confidence in the building sector dropped from 31 percent to 18 percent in June. Capacity utilisation in the sector also eased from a record 94.6 percent to 93.8 percent in June, likely reflecting the effects of softer construction activity earlier this year.
Confidence is now highest in the services sector, despite the easing in demand growth in the past quarter, and expectations of further slowing in the next quarter.
A combination of softer sales growth and weak profitability is weighing on retailer confidence. Although cost pressures have intensified, pricing power is still relatively limited.
Firms investing in plant and machinery in the face of acute labour shortages
Businesses remain optimistic about planning for expansion. However, with labour shortages still very acute, there are signs more businesses are looking to invest in plant and machinery in order to increase output.
Capacity pressures and pricing intentions eased in the June quarter. Although we continue to expect that underlying inflation will lift over the next two years, these recent developments add to the case that there is little urgency for the Reserve Bank to begin lifting interest rates. We continue to expect the Reserve Bank will hold off lifting the Official Cash Rate until the middle of next year.
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The New Zealand Institute of Economic Research has conducted its Quarterly Survey of Business Opinion since 1961. It is New Zealand’s longest-running business opinion survey. Each quarter we ask around 4,300 firms about whether business conditions will deteriorate, stay the same, or improve. The responses yield information about business trends much faster than official statistics and act as valuable leading indicators about the future state of the New Zealand economy. Long term series derived from the survey are held at the NZIER and are available to NZIER members via our website at www.nzier.org.nz.