Some tourism and retail activities are contracting. Photo
Business confidence remains at its best level in 20
years, according to the influential New Zealand Institute of
Economic Research's quarterly business opinion.
However, while there is a broadening recovery across regions,
there are weak spots.
Activity was particularly strong in Auckland, Canterbury and
much of the South Island.
But Northland, Bay of Plenty, Gisborne-Hawkes Bay and Otago
were still contracting, according to the survey.
In contrast, Southland's domestic trading activity grew 33%,
Canterbury-West Coast grew 24% and Tasman-Nelson-Marlborough
Otago-Southland Employers Association chief executive John
Scandrett said the diversity of the regional make-up and the
early March survey timing were the key elements to keep in
mind when assessing the results of the survey.
''We know we have strong economic growth in Central Otago
that is not naturally mirrored elsewhere in the province. And
we know we can point to recent national-leading manufacturing
survey outcomes that straddle a wide range of export
businesses and primary industry activities.''
There were also pockets of contraction in selected sectors,
including in some retail and tourism activities, he said.
Mr Scandrett would have been more interested to see the
survey outcome had it been undertaken in the last half of
During the month, there had been several positive
announcements highlighting significant local construction,
education and service sector momentum.
Inclusion of that positive information might have delivered a
''considerably stronger'' Otago result.
''I feel too, we here in the South, at this time, are
somewhat in awe of the magnitude of the high-revving
Canterbury and Auckland economic development gains. There
might be some unwitting survey understatement of how we feel
when we are lining up with what is happening further north,''
Mr Scandrett said.
NZIER principal economist Shamubeel Eaqub said trading
activity, which closely mirrored GDP growth, accelerated to
the fastest pace since December 2003 - when annual GDP growth
was near 4.5%.
''While we do not expect economic growth to hit such heady
rates in the current business cycle, as credit conditions are
very different now, our latest survey paints a clear picture:
the recovery is strengthening.''
Business confidence held steady in the three months ended
March and remained at the highest level since mid-1994.
Optimism and activity was being realised into hiring,
investment, increasing margins and profits.
Intentions to invest in building, in particular, were soaring
and were at the highest levels since records began in 1975,
Mr Eaqub said.
Price increases were accelerating. Firms were finally
implementing intended price increases as consumer demand
strengthened. Fattening margins and growing sales were
''This is consistent with increasing inflation but also with
more investment and a lift in economic activity.''
Increased inflationary pressure meant more financial services
sector firms expected interest rates would rise - a net 87%,
up from 69% in December, he said.
BNZ senior economist Craig Ebert said he was surprised by
survey staffing constraints not getting any worse.
''Yes, they remain consistent with a tightening in the jobs
market - but in a gradual, rather than rapid, fashion.
"So we probably shouldn't expect the unemployment rate to
fall precipitously over the near-term, especially with strong
levels of net immigration acting as a safety valve on the
ASB chief economist Nick Tuffley said the inflation
indicators showed a marked increase in the number of firms
intending to raise prices, as well as the number expecting to
face increased costs.
That suggested inflation would continue to rise this year.
''The inflation picture remains somewhat mixed, with measure
of capacity constraints not showing much of an increase.
Capacity pressures also remain much more pronounced in
Canterbury than through the rest of the country.
''With inflation rising but not surging, we still expect the
official cash rate to rise at the Reserve Bank's April, July
and December reviews this year, on the way to a peak of 4.5%
in late 2015.