8 Jul 2014

Business confidence down

5:50 pm on 8 July 2014

Business confidence has fallen from two decade highs.

The Institute of Economic Research's June quarterly survey of business opinion found a net 33 percent of firms expect economic conditions to improve, compared with a net 52 percent in the previous period.

Trading activity, which the Institute said closely mirrors economic growth, eased back, and indicates annual economic growth of 2.8 percent.

Activity overall remains robust, but momentum has eased in some rural regions and Auckland, which the Institute attributes to the impact of falling dairy prices on rural incomes, and slowing growth in Auckland's housing market.

Firms are starting to raise prices at a faster pace, indicating inflation will hit 2.5 percent by the end of the year.

Principal economist at the Institute, Shamubeel Eaqub, said inflation pressures are building, and while he expects the Reserve Bank to lift interest rates again next month, he doesn't think they should, because it's likely to hit struggling regions and industries particularly hard.

He said while growth has moderated from the previous survey's estimate of 3.8 percent, it's still healthy.

Firms such as Christchurch-based Ebos agree, saying the central bank's efforts to rein in the housing market are threatening growth.