Business confidence edges up

By BRIAN FALLOW economics editor

Business confidence edged higher this month in the National Bank's Business Outlook survey.

Pessimists about the general business environment still outnumber optimists, but by a smaller margin than last month - a net 19 per cent compared with 22 per cent last time.

However, firms continue to be more confident about their own prospects, a net 24 per cent expecting better times, unchanged from last month.

That is a better indicator of the outlook for growth and is consistent with an economy expanding at a sustainable pace of 2.5 to 3 per cent, said the bank's chief economist, Dr John McDermott.

Hiring and investment intentions were little changed.

"The agriculture sector is feeling a little better about things, which is not surprising with the dollar off its highs and commodity prices strong," he said.

Gloomiest, both about the general outlook and their own prospects, are construction firms.

"There is some nervousness about what the future holds in the light of falling migration and rising interest rates," McDermott said.

The survey recorded a sharp lift in the proportion of firms intending to raise their prices, to a net 30 per cent from 22 per cent last month.

"That is a signal CPI inflation will be at or above 3 per cent very soon," McDermott said.

Rising oil prices over the past two months could account for a large proportion of the rise, but that masked more persistent inflation, especially in sectors not exposed to international prices.

"With uncertainty set to remain in Iraq for some time and strong global demand underpinning a large proportion of the surge in international oil prices," he said, "there looks to be little chance of respite at the pump over the months ahead."