KEY POINTS:
Business confidence has deteriorated in the latest Quarterly Survey of Business Opinion (QSBO) published today by the New Zealand Institute of Economic Research (NZIER).
The QSBO puts the balance of firms surveyed in the March quarter expecting a deterioration in the general business situation in the next six months at 15 per cent.
This figure is a turnaround from the last survey when a net 3 per cent expected the general business situation to improve.
Overall, NZIER describes general business confidence as steady but it says the decline in its unadjusted business confidence measure was reflected in all regions and business sectors.
Firms in the North Island recorded the most sizeable decline.
The survey also indicates that there are inflationary pressures in the economy.
Seasonally adjusted, a net balance of 3 per cent of firms expected the general business situation to deteriorate in the next six months.
In the last survey a net 7 per cent expected a deterioration. But the numbers are well down from the net 72 per cent expecting a deterioration in December 2005.
Seasonally adjusted, the number of firms reporting an increase in their own activities was a net 11 per cent. Last quarter, the number reporting an increase was 6 per cent more than the number reporting a decrease.
A net balance of 18 per cent of firms, seasonally adjusted, expected their own trading activity to lift in the next three months.
NZIER said that higher optimism amongst New Zealand manufacturers in the December survey was short-lived.
In the latest survey a net 23 per cent of New Zealand manufacturers expect the general business situation to deteriorate compared with a net 5 per cent of Australian manufacturers.
But the outlook for building construction firms for the next three months is more positive than their reported experience over the last three months.
A net balance of 2 per cent reported an increase in output in the March quarter, up from 3 per cent who reported a decrease in the December quarter.
Building materials suppliers are positive, with a net 31 per cent expecting to increase their output compared with the net 4 per cent that actually increased output in the March quarter.
A net 12 per cent of firms intended to increase staff in the next three months.
Capacity utilisation was little changed at 91.8 per cent from 91.7 per cent in the December quarter, but was still seen as high by historical standards.
A net 77 per cent of financial services firms expect interest rates to be higher over the next 12 months compared with the year just gone.
The availability of labour as the factor inhibiting increasing output has risen to 22 per cent in the March survey from 19 per cent in the December survey.
A net balance of 17 per cent of firms report a decline in profitability in the last three months and a net balance of 4 per cent expect a decline in the next three months.
NZIER director Brent Layton said there were signs of inflationary pressure in the survey, particularly in the capacity utilisation, labour and pricing intentions measures.
The survey had mostly been filled in by businesses just after the last rise in official interest rates and that may have influenced businesses.
He said the survey would not give the central bank much comfort and one more rise in interest rates could not be ruled out based on the survey. However, the survey was just one item of information the central bank considered.
A net 27 per cent of firms increased selling prices in the past three months. This was up from a net 21 per cent in the December quarter.
- NZPA
