Business confidence continues to slip

Business confidence has continued to slip with weaker demand driving down expectations for an improvement in economic conditions in the near-term.

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The latest Institute of Economic Research quarterly survey of business opinion (QSBO) shows a net 34 percent of firms expect a deterioration in general economic conditions over the coming months on a seasonally-adjusted basis.

That was up from a net 11 percent of firms feeling pessimistic in the previous quarter.

The institute said the results point to inflation pressures in the economy remaining strong over the coming year.

A net 1 percent of firms reported weaker demand in their own business in the December quarter, which was carried out from 8 November to 10 January, and included the effects on Auckland and its neighbouring regions in lockdown as well as domestic and international border restrictions.

The manufacturing sector was the most downbeat of all the sectors included in the survey, with a net 34 percent expecting a worsening in the economy over the coming months.

The services sector was also particularly downbeat, partly reflecting the relatively greater impact of Covid-19-related containment measures on the sector, as well as intense cost pressures.

Cost pressures were also driving down building sector sentiment with a net 92 percent of firms reporting an increase in costs in the December quarter.

Labour shortages were also adding costs, with wages on the rise.

A net 61 percent reported increased costs in the December quarter – the highest level since June 2008.

Over half of businesses raised prices in the December quarter, and a net 65 percent plan to increase prices in the next quarter.