New Zealand businesses got out of the doldrums in the final three months of 2015 as the economy picked up from its mid-year sluggishness and firms saw improvements in their own activity, even if that didn't drop to the bottom line.
A net 13 per cent of firms surveyed in the New Zealand Institute of Economic Research's December quarterly survey of business opinion expect general business conditions to improve, turning around a gloomy outlook of a net 10 per cent seeing a deterioration three months earlier, which was the gauge's most pessimistic reading in four years. A net 18 per cent experienced better trading activity, up six percentage points from September, and a net 20 per cent see better trading ahead, an improvement of two points.
The survey of 974 firms was through a period when the economy showed signs of improvement as a lower currency stoked demand for New Zealand's exports, global dairy prices recovered from their earlier collapse, record tourism numbers arrived to the country, and building activity remained robust with the Auckland house building programme.
"Demand has strengthened across all sectors in the survey and business expect a further improvement in their own trading activity over the next quarter," senior economist Christina Leung said in a statement. "This suggests solid GDP (gross domestic product) growth over the first half of 2016."
The survey showed a net 18 per cent of businesses experienced increased costs and 15 per cent see those costs rising, while 3 per cent raised prices, and 9 per cent anticipate hiking prices. That's kept pressure on margins, and a net 4 per cent of firms reported a decline in profitability in the December quarter, its third decline, through a net 4 per cent of businesses see that turning around in the March quarter.
Leung said inflation was still subdued, and NZIER expected the Reserve Bank would keep the official cash rate on hold at 2.5 per cent this year "in the face of solid economic growth".
Statistics New Zealand will release the fourth quarter consumers price index today, which is expected to show annual inflation of 0.4 per cent in 2015, below the central bank's target band of between 1 per cent and 3 per cent.
Governor Graeme Wheeler will review the benchmark rate next week.
Firms were more upbeat about hiring, with a net 17 per cent taking on more staff in the December quarter, up from 9 per cent in September, and employment intentions steady at 14 per cent.