New Zealand Q4 business confidence improves but economy remains weak: think tank
NEW Zealand’s business confidence improved in the fourth quarter to reach its highest level since the second quarter of 2021, but the economy remains weak, a private think tank said on Tuesday (Jan 14).
A net 16 per cent of firms surveyed expected general business conditions to improve in the fourth quarter, compared with a net 1 per cent expressing pessimism in the third quarter, the New Zealand Institute of Economic Research’s (Nzier) quarterly survey of business opinion showed.
However, Nzier said more than half the responses to the survey came in ahead of the release of third-quarter gross domestic product data on Dec 19, which was significantly below market expectations and saw New Zealand fall into a technical recession.
“Although sentiment has improved, and there are expectations of a recovery in activity, firms remained cautious about hiring and investment,” Nzier cautioned in its report.
On a seasonally adjusted basis, a net 9 per cent expected business conditions to improve, versus net 4 per cent pessimism recorded in the previous period. The survey’s measure of capacity rose 91.3 per cent, from the previous quarter’s 89.1 per cent.
But Nzier said despite the continued improvement in business confidence, the measure of firms’ own trading activity continues to suggest a weak demand environment.
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Christina Leung, principal economist at Nzier, told reporters and economists the result indicated that the economy contracted further in the fourth quarter.
The survey’s cost and pricing indicators point to a continued monetary easing in New Zealand. A net 10 per cent of firms reported being able to raise prices to pass on costs, which was at a historically low level even though it was slightly higher than the net 3 per cent in the prior quarter.
“We don’t see anything in these results which would stand in the way of another 50-basis point OCR (official cash rate) cut by the Reserve Bank at its February meeting,” Leung said.
New Zealand’s central bank has cut the cash rate by 125 basis points since August. The market expects it will cut by a further 50 basis points when it meets on Feb 19. REUTERS
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