KEY POINTS:
Business confidence dropped slightly this month, but a rise in inflation expectations is unlikely to give much comfort to Reserve Bank Governor Alan Bollard.
The National Bank Business Outlook survey for March found 13 per cent of businesses expecting economic conditions to deteriorate in the next 12 months, compared with 6 per cent expecting a deterioration last month. On their own prospects, 24 per cent of companies were expecting an improvement, down slightly from 26 per cent last month.
National Bank chief economist Cameron Bagrie said the change was insignificant and the data still pointed to annual economic growth of around 2.5 per cent.
Despite the drop in confidence, "inflation pressures remain elevated", he said.
Pricing intentions have nudged up, with 31 per cent of businesses expecting to raise their prices in the coming year, up from 29 per cent last month.
"Pricing intentions at these levels are consistent with continued pressure on medium-term inflation trends," Bagrie said.
After the Reserve Bank's rate rise this month, many more businesses are expecting further rate rises - 44 per cent this month compared with 25 per cent last month.
"To be fair, it is too early to determine whether the Reserve Bank's decision to raise the official cash rate in March has had any impact," Bagrie said.
He indicated that the Reserve Bank was likely to raise rates again unless it saw weaker data.
