Growth moderates to a more sustainable level - Quarterly Survey of Business Opinion, April 2015

14 April 2015

New Zealand Institute of Economic Research (Inc)
Media release, 14 April 2015
Embargoed until 10am 14 April 2015

The NZIER Quarterly Survey of Business Opinion

Growth moderates to a more sustainable level

The latest NZIER Quarterly Survey of Business Opinion shows the New Zealand economy heading into 2015 in good shape. While the softening in activity indicators suggests a moderation in growth in the March 2015 quarter, annual growth is still expected to be respectable at just over 3%.

Business confidence eased a touch at 20% net optimists, after adjusting for the usual seasonal variations. While confidence is well below the lofty levels seen a year ago, firms are still fairly optimistic.

The services sector has fared particularly well, buoyed by increased house sales in an environment of low interest rates and strong mortgage lending competition amongst banks. The manufacturing sector has also been surprisingly resilient in the face of a higher NZD/AUD.

Profitability expectations lift

Experienced domestic trading activity, which closely mirrors GDP growth, eased from 22% in the December 2014 quarter to 19%. This is consistent with annual GDP growth moderating to just over 3% for the year to March 2015.
Profitability expectations have picked up, with more businesses now thinking about investing in buildings and plant and machinery.

Capacity pressures edge up, but little sign of inflationary pressures

Despite the solid level of activity, inflation pressures remain subdued. Few firms report cost pressures, or plan to raise prices.

Capacity pressures picked up in the March 2015 quarter, with an increase in capacity utilisation in the building sector but a dip in the manufacturing sector.  

The low inflation environment has driven a decline in interest rate expectations. A net 4% of financial services firms now expect interest rates to fall over the coming year, in contrast to a net 17% expecting an increase in interest rates in the previous quarter.

Figure 1 Services sector strengthens

For further information please contact:
Christina Leung
Senior Economist & Head of Membership Services
Ph +64 21 992 985

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