WELLINGTON - The Institute of Economic Research's latest business opinion survey depicts an economy in recovery mode, with inflationary pressures building.
Optimists about the general economic situation outnumber pessimists by a smaller margin than three months ago (a net 18 per cent, down from 30 per cent in July),but in common with other confidence surveys, respondents at the moment are more positive about their own activity and prospects than the economy as a whole.
Institute director Alex Sundakov said that earlier in the year there was a contrast between high expectations and the actual experience of the previous three months.
Now things were the other around, with firms reporting robust growth in actual trading activity while general confidence continued to come back down to earth.
As the Reserve Bank debates whether to raise official interest rates on November 17, several of the survey's results will support a rise:
* A net 23 per cent of firms expect to raise prices in the next quarter - the highest level for nearly five years.
* For the first time since early 1996 more firms expect to be hiring than shedding staff.
* Capacity utilisation among manufacturers and builders has risen for the fourth quarter in a row, to levels last seen 21/2 years ago.
* Export expectations, though down on last quarter, remain strong.
Mr Sundakov said the survey results confirmed his view that the June quarter gross domestic product result, which showed an unexpected 0.3 per cent contraction, should be treated very cautiously in terms of seasonal factors.
"Other than that it is unfolding exactly as most forecasters, including the Reserve Bank, expected."
Manufacturers are the most positive. They report a lift in export sales and expect further gains, while their expectations of the domestic market have improved markedly.
Building firms reported a strong lift in output, but falling prices and rising costs. They expect a further increase in work this quarter, requiring more staff, and some recovery in prices.
Merchants reported weaker sales but expect a rebound this quarter. Their prices rose, however, and are expected to rise further in the December quarter.
