WELLINGTON - Warmed by an improving domestic economy, business confidence has rocketed in the latest New Zealand Institute of Economic Research's quarterly opinion survey.
A net 47 per cent of respondents expect the general business climate to improve over the next six months, up from 19 per cent threemonths ago and the highest level of confidence since June 1994.
In a sign that inflation will not linger at the historic lows announced for the March quarter on Tuesday, more firms (a net 4 per cent) now expect to raise their prices than lower them in the next three months.
The optimism is spread across all sectors, with service firms and merchants leading the way. Both sectors reported of a sharp turnaround in domestic sales in the March quarter, which they expect to continue for the three months ahead.
Despite improved profit expectations, respondent firms are still planning to cut back on employment over the next three months, NZIER said.
But for the second quarter in a row, they anticipate spending more on plant and equipment over the coming year. Some of that is likely to relate to Y2K problems.
Manufacturers are more optimistic despite lower output in the March quarter as improved exports only partially offset weaker domestic sales.
A net 27 per cent expect to lift exports in the three months ahead, but expectations on that score tend to run ahead of the experience firms report three months later.
Builders reported a decline in selling prices, though not as sharp a fall as in previous quarters. They expect their costs to stabilise next quarter and their prices to rise slightly. Sales are expected to strengthen.
NZIER said the survey confirmed that New Zealand was firmly in recovery mode, but growth would not reach the heights it did in the previous cycle.
One difference is that household debt levels are much higher - up from 59 per cent of disposable income in 1992 to 93 per cent last year. That suggested consumption growth would be more subdued, it said.
At the same time exports are recovering only slowly. Coupled with strong domestic activity that looked set to bring concerns about the current account deficit (2 per cent of GDP in 1992, but 6 per cent now) back to the fore.
