NZ business confidence rockets to 20-year high, lifting jobs, profits, investment
Jan. 14 (BusinessDesk) – New Zealand business confidence climbed to a 20-year high in the fourth quarter, lifting
expectations for profits, hiring and investments, and raising the prospects for inflation to start to accelerate.
A net 52 percent of businesses were optimistic in the December quarter, seasonally adjusted, the highest since June 1994
and up from 33 percent three months earlier, which was itself the highest in more than three years, according to the New
Zealand Institute of Economic Research’s Quarterly Survey of Business Opinion.
Domestic trading activity, which is closely aligned with economic growth, climbed to the strongest since March 2005,
with a seasonally adjusted net 15 percent of firms experiencing a pickup in their own activity. Expectations for the
coming quarter rose to 32 percent from 24 percent.
“This quarter every region in our survey was doing better,” said Shamubeel Eaqub, principal economist at NZIER. “Until
recently much of the recovery was concentrated in Canterbury. This has now broadened to most regions across New Zealand,
which points towards a more sustainable and stable recovery.”
The survey comes as economists bet the central bank will raise interest rates in the first quarter, lifting the official
cash rate from a record low 2.5 percent to cool inflation pressures in what some economists have called a ‘rock star
economy’.
Those that lifted hiring in the latest quarter rose to a net 7 percent from 1 percent, while for the coming quarter
hiring intentions slipped to 12 percent from 17 percent. Those reporting ease in finding labour deteriorated to -30
percent from -29 percent for skilled workers and worsened to -10 percent from -5 percent for unskilled workers. Much of
the pressure is in Canterbury.
The long-run average is -16 percent for skilled labour and a net 15 percent for unskilled.
The survey was taken before Dec. 15, meaning it hasn’t captured the pickup in retail activity over the peak
Christmas-New Year period, though merchants still reported the strongest retail sales since September 2002, with those
reporting higher sales jumping to 20 percent from 2 percent while orders placed over seas rose to 18 percent from 5
percent.
Price pressure remained relatively subdued, Eaqub said. Those reporting a rise in average costs slipped to a net 21
percent from 22 percent and expectations for the coming quarter fell to 18 percent from 26 percent. At the same time,
those reporting a rise in selling prices rose to 10 percent from 8 percent and for the coming quarter held steady at 24
percent.
“Firms intend to raise prices in coming quarters due to increasing capacity pressures and strengthening economic
growth,” Eaqub said. “Capacity constraints are most pronounced in Canterbury, but are starting to emerge in other
regions too.”
Capacity utilisation slipped to 90.2 percent from 91 percent three months earlier, while those seeing capacity
constraint climbed to 12.7 percent from 10.8 percent.
Those seeing profit growth turned positive, just in the latest quarter, at a net 1 percent from -8 percent in the third
quarter. For the coming quarter, a net 16 percent saw profit growth from 12 percent three months earlier.
Investment intentions for buildings rose to a net 7 percent from 3 percent and on plant and machinery those planning to
invest more jumped to 18 percent from 8 percent.
(BusinessDesk)