NZ businesses optimistic about 2017

nzconfidenceNew Zealand businesses remain confident about the year ahead, with business confidence levels remaining high towards the end of 2016, according to the latest New Zealand Institute of Economic Research (NZIER) quarterly report.

The NZIER report, released yesterday, found that a net 26 per cent of businesses are expecting an improvement in economic conditions over the coming months, despite modest softening in demand in their own businesses.

According to NZIER, higher activity levels than a year ago are underpinning the optimism, which is indicative of solid momentum in the economy that should provide a buffer against the downside risks from unexpected events abroad.

Southland businesses were particularly buoyant, as confidence reached its highest levels since early 2014. Confidence in Wellington was also high, with little indication that recent earthquakes have stymied prospects.

NZIER said that pricing indicators are pointing to a pick-up in inflation this year, with capacity utilisation rebounding to 92.7 per cent in the December quarter as more businesses reported capacity as a constraint.

Businesses are finding it easier to raise prices, with a net seven per cent doing so in the December quarter – representing a turnaround of the net four per cent cutting of prices in the previous quarter.

On the back of a likely rise in inflation the Reserve Bank has reportedly indicated an aversion to cutting rates any further. NZIER expects the central bank to keep rates on hold until mid-2018, before starting on a gradual tightening-cycle.

The official cash rate in New Zealand is currently 1.75 per cent, after a 0.25 per cent cut in November last year.

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