13 Apr 2021

Confidence improves slightly but businesses 'generally downbeat' - economist

11:49 am on 13 April 2021

Business confidence has improved modestly but remains pessimistic in the face of rising prices and supply disruptions.

Cropped image of businessman checking expense in office

Photo: 123RF

The NZ Institute of Economic Research's quarterly survey of business opinion showed a seasonally adjusted net 11 percent of firms expected conditions to get worse over the near term, against 16 percent in the previous survey.

NZIER principal economist Christina Leung said demand was generally holding steady although some sectors were finding it harder than others, but it was consistent with growth in the economy .

"Businesses are generally downbeat but less so, and there has been some softening in demand, but what stands out in the survey is cost pressures because of Covid-related supply chain disruptions."

"But we will see some growth in the March quarter," she said.

She was forecasting 2 percent growth for the year ended March.

Leung said inflation pressures were starting to show through with a net third of respondents reporting higher prices in the past quarter and close to half expecting them in the next three months.

But she said increasing numbers of businesses were finding it easier to pass on those prices and that pointed to stronger inflation pressures ahead, which in turn was leading firms to forecast lower profits.

One positive feature was a turn around in employment with a net 8 percent of firms taking on staff in the first three months compared with jobs being shed at the end of last year, although it was getting harder to find skilled staff. Firms were also looking to invest more particularly in plant and machinery.

Leung said the survey showed nothing to alter the Reserve Bank's policy of easing money policies, with interest rates on hold for several years to come.

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