19 Jan 2016

Business confidence bounces back

12:42 pm on 19 January 2016

Business confidence has bounced off a near five-year low, with firms more confident about their own prospects and looking to hire more staff.

The New Zealand Institute of Economic Research (NZIER) survey of business opinion for the December quarter showed a seasonally adjusted net 13 percent of firms expect the economy to improve in the coming months, compared with a net 10 percent pessimism level in the previous quarter.

Business improved for companies in the final quarter of last year, and a net 18 percent expect a further improvement in the first quarter of 2016.

Respondents expected to hire more staff in coming months but a growing number said it was becoming increasingly difficult to find skilled staff. Investment intentions were also flat, pointing to some caution.

Inflation pressures remain low as companies find there is little leeway to raise prices, which in turn is squeezing profit margins, although low fuel prices are also helping to keep costs constrained .

NZIER senior economist Christina Leung said the economy was growing at a solid pace, which she expected to reach 3 percent by the end of the year.

"Businesses are more confident across the board, it's shaping to be a reasonably good year."

"All things considered the Reserve Bank can keep its official cash rate steady [at 2.5 percent] for the rest of the year," she said.