Losing momentum - Quarterly Survey of Business Opinion, January 2012, media release

New Zealand Institute of Economic Research (Inc), Media release, 17 January 2012

Embargoed until 10am, Tuesday 17 January 2012

NZIER Quarterly Survey of Business Opinion

Losing momentum

NZIER’s Quarterly Survey of Business Opinion (QSBO) shows a moderation in economic activity in the December 2011 quarter. Firms’ experienced trading activity eased (-4% from +1%) on a seasonally adjusted basis. This is consistent with annual economic growth of around 1.6%.

“Activity eased in the December quarter. While services and retail grew, manufacturing was flat and there was less construction. Canterbury is rebounding from the earthquake disruption, but the rest of the country is slowing. Retailers’ very strong expectations for the December quarter, which may have been related to the Rugby World Cup, did not materialise”.

“The survey shows slowing momentum but still positive activity in the economy. Firms report continued hiring and positive hiring intentions. This is encouraging, given a darkening global economic backdrop,” said Shamubeel Eaqub, Principal Economist at NZIER.

Canterbury rebounding

Canterbury is rebounding from the earthquake disruptions. Investment intentions have soared as firms seek to replace lost capital. Building, plant and machinery investment intentions have surged, but they are slowing elsewhere in the country. There is some evidence of capacity pressures emerging in Canterbury, particularly in the construction sector.

Local and global factors will keep interest rates on hold

Outside of the construction sector, easing costs and pricing intentions suggest inflation will be contained over coming quarters. Activity indicators are slowing outside of Canterbury. Heightened global tensions are affecting confidence. The RBNZ is clearly mindful of these risks and the OCR is likely to stay unchanged at 2.5% for some time.