New Zealand 1st-quarter business confidence takes a tumble

[WELLINGTON] New Zealand business confidence took a tumble in the first quarter, adding to the risk the central bank might cut rates again as early as this month.

A net 2 per cent of firms surveyed expected general business conditions to improve compared with a net 15 per cent in the fourth quarter, the New Zealand Institute of Economic Research's quarterly survey of business opinion (QSBO) showed.

On a seasonally adjusted basis, a net 1 per cent of businesses expect a deterioration in the economy over the next six months, from 13 per cent expecting an improvement in the prior quarter.

The survey also showed that only a net 6 per cent of businesses expect an improvement in demand over the next quarter, the lowest level since early 2011.

The central bank surprised financial markets last month by cutting the cash rate by a quarter per centage point to 2.25 per cent.

NZIER is expecting another rate cut by mid-year and the more downbeat mood among businesses suggests "an increasing risk" that the Reserve Bank of New Zealand will choose to cut rates again in April rather than June, said NZIER senior economist Christina Leung.

There is a risk the central bank could take the official cash below 2.0 per cent, Ms Leung added.


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