Business confidence knocked back
Tue, 10 Jul 2012 1:23p.m.
New Zealand firms became more pessimistic in the second quarter as the nation's economic recovery lagged behind expectations, according to the New Zealand Institute of Economic Research.
A net 1 percent of firms surveyed in the NZIER's latest quarterly survey of business opinion were pessimistic about the general business situation, compared to a net 24 per cent of optimists in the previous period.
Their experienced trading activity edged up to 1 percent from zero in the previous quarter. The survey is consistent with annual gross domestic product growth of 2 percent.
"Expectations continue to be really positive, but reality still is not keeping pace," principal economist Shamubeel Eaqub told a briefing in Wellington.
"People keep expecting the recovery to get back to the old way, but that hasn't happened."
New Zealand's economy grew at a pace of 1.1 percent in the first three months of the year, the fastest quarterly pace in five years, as increased milk production stoked dairy manufacturing.
Mr Eaqub said Canterbury was showing encouraging signs as the reconstruction effort began to take off, though the rest of the nation was showing little evidence of improvement.
A net negative 6 percent of financial services firms expect interest rates to rise in the coming year, compared to a net 57 percent in the previous quarter, indicating companies are picking rates to stay low, and Mr Eaqub isn't picking the Reserve Bank to raise rates until 2014.
"The current rate is inappropriately high," Mr Eaqub said.
A lower benchmark interest rate "might take the edge off the currency, which I think might be helpful to the New Zealand economy".
Last month, the Reserve Bank kept the official cash rate at a record-low 2.5 percent due to the uncertainty over Europe's sovereign debt woes.
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