New Zealand firms turned optimistic about the state of the economy in the June quarter as moderating cost pressures helped boost margins and lifted profit expectations.
A seasonally adjusted net 18 per cent of firms surveyed in the New Zealand Institute of Economic Research's (NZIER) quarterly survey of business opinion (QBSO) expect general business to improve, turning from a net 2 per cent of pessimistic responses three months earlier. A net 22 per cent of those companies experienced stronger trading activity in the past quarter, and a net 19 per cent see more expansion in the coming three months, up from 18 per cent and 6 per cent respectively in March.
Stronger profit expectations helped underpin the pick-up in confidence, with a net 2 per cent experiencing bigger profits in the past quarter and a net 16 per cent expecting more gains in the coming period. Fewer companies faced higher costs in the June quarter, and 19 per cent anticipate an increase in expenses, compared to 24 per cent in March, while a net 1 per cent raised their prices in the June quarter, and a net 11 per cent expect to hike prices in the coming period.
"Moderating cost pressures and improved pricing power have seen an improvement in profitability amongst businesses," NZIER senior economist Christina Leung said. "Demand held up over the quarter, against expectations earlier this year of a softening in demand." The QSBO follows ANZ Bank New Zealand's business confidence survey last week, which showed optimism was at a six-month high in June as the country's booming tourism and construction sectors continued to support economic activity.
Leung said the building pipeline was a key driver in the economy and expects gross domestic product will peak at 3 per cent in the June quarter, before moderating to 2.8 per cent by the end of the year.