A Goldilocks finish to 2014 - Quarterly Survey of Business Opinion, January 2015 - media release

20 January 2015

New Zealand Institute of Economic Research (Inc)
Media release, 20 January 2015
Embargoed until 10am 20 January 2015
The NZIER Quarterly Survey of Business Opinion

The New Zealand economy had a Goldilocks finish – not too hot, not too cold, according to the NZIER’s Quarterly Survey of Business Opinion. Optimism, activity, hiring and a slew of other indicators rebounded in the December 2014 quarter from moderation in the preceding six months. But cost and inflationary pressures remained contained.

Business confidence has stabilised at 21% net optimists, after adjusting for the usual seasonal variations. While optimism has faded from the heady highs of late 2013 and early 2014, firms are optimistic relative to history.
Merchants were more confident in the December 2014 quarter, but optimism faded for builders, manufacturers and services firms.

Resilient economic activity

Experienced domestic trading activity, which closely mirrors GDP growth, strengthened from 15% in the June and September 2014 quarters to 20%. This is consistent with annual GDP growth of 3%-3.5% in the December 2014 and March 2015 quarters.

The economic recovery is flowing through to increased hiring (which surged in the latest quarter to the fastest pace since December 2003), but profits have been patchy.

Capacity pressures intensify, but inflationary pressures ease

Capacity pressures intensified. More firms are saying capacity is a constraint to growth (this is most intense in Canterbury, although also elevated elsewhere). Manufacturers and construction firms report shrinking spare capacity, but building materials companies report increasing capacity. 

Despite intensifying capacity pressures, inflationary pressures are subdued. Costs, both historical and expected, are at a historically low level. Price increases eased in the latest quarter and are expected to remain low in the next quarter. A high NZD and falling commodity prices may be external influences on this.

Solid economic growth with modest inflationary pressures means that only 13% of financial services firms expect interest rates to rise over the next year, down from 66% in September.

For further information please contact:
Shamubeel Eaqub
Principal Economist
Mobile 021 573 218| Main (04) 472 1880
Email shamubeel.eaqub@nzier.org.nz

Background
The New Zealand Institute of Economic Research has conducted its Quarterly Survey of Business Opinion since 1961. It is New Zealand’s longest-running business opinion survey. Each quarter we ask around 4,300 firms about whether business conditions will deteriorate, stay the same, or improve. The responses yield information about business trends much faster than official statistics and act as valuable leading indicators about the future state of the New Zealand economy. Long term series derived from the survey are held at the NZIER and are available to NZIER members via our website at www.nzier.org.nz.

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