Off the wire
• Xinhua China news advisory -- April 5  • 2nd LD Writethru: Vietnam reports first cases of Zika virus infection  • 1st LD: Vietnam reports first cases of Zika virus infection  • Urgent: Vietnam reports first cases of Zika virus infection  • S. Korea's foreign reserves rebound in 5 months at 369.8 bln USD  • Bolivia's The Strongest seeks qualification against River Plate  • Aussie stem cell therapy capable of regenerating tissue like salamander  • Sinosteel expected to break ground on Bolivian sheet metal plant in August  • China treasury bond futures open lower Tuesday  • Peruvian presidential candidate distances herself from discredited father  
You are here: 　 Home

Falling business confidence points to New Zealand interest rate cuts

Xinhua, April 5, 2016 Adjust font size:

The busted hope of a rise in demand has seen New Zealand business confidence fall in the first quarter of this year, according to a survey by an independent economic think-tank out Tuesday.

A net 1 percent of businesses were expecting a deterioration in the economy in the next six months, said the New Zealand Institute of Economic Research (NZIER) Quarterly Survey of Business Opinion.

"A key driver of this gloominess is that firms have consistently had their expectations of a pick-up in sales dashed in reality. Their optimism is starting to wane -- firms now see weak demand ahead," said a statement from the NZIER.

Only a net 6 percent of businesses expected an improvement in demand, the lowest level since early 2011.

"Businesses are paring back on hiring in anticipation of softer demand. Manufacturers are particularly negative about hiring, with a net 5 percent of manufacturers expecting to reduce staff numbers in the next quarter," said the statement.

Meanwhile, intentions to invest in new buildings and plant and machinery had stabilized after trending lower over 2015, suggesting modest growth in business investment.

A net 26 percent of businesses reported higher costs in the March quarter, the highest level since mid-2012, and more businesses expected further cost increases ahead, but they were unable to pass on rising costs in the form of higher prices, which ate into profitability.

"Nonetheless, businesses expect to raise prices in the next quarter, with expectations of improved profitability at its highest level in two years," it said.

The Reserve Bank of New Zealand had indicated it was likely to cut the official cash rate (OCR), currently at 2.25 percent, further this year, and the NZIER expected it to hit 2 percent by June.

"The more downbeat mood amongst businesses suggests an increasing risk the Reserve Bank will choose to cut in April in a bid to stimulate the New Zealand economy," it said.

An economic note from the ASB Bank agreed the survey might add to pressure for the Reserve Bank to make further cuts to interest rates.

"We continue to expect two further 25-basis-point OCR cuts, and see the most likely timing as June and August, but the risks are skewed to an earlier move," it said. Endit