Firms remain dubious about recovery - NZIER
The economy looks likely to remain flat for a while, according to the latest New Zealand Institute of Economic Research Quarterly survey of business opinion.
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The economy looks likely to remain flat for a while, according to the latest New Zealand Institute of Economic Research Quarterly survey of business opinion.
The drop in business mood was not as bad as expected: they still show a net 11% are pessimistic about the year ahead, compared to a net 1% positive in the last survey.
The survey is the first since the disastrous February Christchurch earthquake.
Firms report higher costs – mostly due to higher oil and related prices – but an inability to pass those prices on yet.
The survey results are “consistent with a flat economy the first half of this year, marginal or no growth,” said principal economist Shamubeel Eaqub.
“Profitability is still trending lower. Profitably still tends lower over the past three months. Costs have gone up but prices haven’t kept pace.”
There has also been a “quite horrible little recovering in investment intentions.” Investment intentions are slightly above trend but still basically flat, he said.
“You would expect investment to go up well above trend in the recovery and then slipping back to trend. Even though we are seeing businesses saying they are going to invest more they are not doing it… you would expect to see investment more at this point so they can make the most of the recovery. But their margins are being squeezed and they don’t have the capacity to do so.”
That also will probably mean an economic recovery lower than expected when it finally gets under way.
“We could be looking at a five years of 2% average growth in GDP instead of the average of 3% we’ve got used to over the past couple of decades.”
Rob Hosking
Tue, 05 Apr 2011
Tue, 05 Apr 2011
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Firms remain dubious about recovery - NZIER
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