Business confidence in New Zealand economy down: survey

Confidence in the economy among New Zealand business leaders has dropped in the first quarter of this year, despite indications that growth will continue, according to a survey out Tuesday.

The survey by the New Zealand Institute of Economic Research (NZIER) showed a net 16 percent of businesses in the first quarter expected better economic conditions over the coming months, down from a net 26 percent in the previous quarter.

The decrease in confidence came despite businesses reporting their own activity holding firm, suggesting annual growth in the New Zealand economy would remain solid around 3 percent over the coming quarters, said NZIER senior economist Christina Leung.

Confidence fell in all sectors, but sentiment remained positive in the building sector, with a net 31 percent of businesses expecting an improvement in economic conditions over the coming months, Leung said in a statement.

The manufacturing and retail sectors saw confidence drop with demand indicators, such as output and new orders, being mixed, but pointing to a still-solid sales outlook.

"Nonetheless, there is more caution when it comes to hiring, particularly amongst retailers," said Leung.

Cost and price indicators pointed to a further lift in inflation over the coming year, and businesses were finding it easier to raise prices, particularly in the building sector.

Commentators generally agreed that that concern over inflation was unlikely to prompt the Reserve Bank of New Zealand to lift its official cash rate -- currently at an historic low of 1.75 percent -- as the rise was coming off a low base.

An economic note from the ASB Bank said the decline in confidence was likely reflecting geo-political concerns. Endit