17 Jan 2012

Business confidence takes a knock

7:22 pm on 17 January 2012

New Zealand's Institute of Economic Research says a fall in prices charged by builders reflects the weak economy.

Business confidence has taken a knock, with more firms expecting the pace of economic activity to slow.

NZIER's latest Quarterly Survey of Business Opinion shows business confidence turned negative at the end of last year, along with builders' prices.

A net 3% of firms expect worsening business conditions over the next six months - a turnaround from a net 10% who were positive three months earlier.

The survey also found the proportion of builders increasing prices fell in the December quarter after a sharp increase in the preceding three months.

Prices edged up in Canterbury, but fell across the rest of New Zealand.

NZIER principal economist Shamubeel Eaqub says the turnaround in pricing reflects a still-turgid building sector.

Mr Eaqub says a big drop in the numbers of architects expecting a pick-up in residential work in the next 12 months is also a concern for the sector's recovery.

Domestic sales remain sluggish, but exports are holding up. Firms expect to invest less in their businesses, although hiring intentions are up.

Mr Eaqub says a build-up of inventories could augur a slowdown in production in the first half of this year if demand remains sluggish, but he does not expect the economy to slip into a recession.