WELLINGTON: New Zealand business confidence fell to its lowest level in nearly three years in the second quarter as the economic outlook loses lustre.
A seasonally adjusted net 7% of firms now expect business conditions to improve over the next six months, down from 20% in the first quarter, the New Zealand Institute of Economic Research’sQuarterly Survey of Business Opinion showed Tuesday.
“The drop in activity indicators in the June 2015 quarter points to annual growth remaining below 3% over the coming year – a marked drop from the 3.5% annual growth we saw at the end of last year,” said Christina Leung, senior economist at NZIER.
Capacity utilization among the companies surveyed rose to 93.4% from 92.3% in the prior survey and is currently at a record high.
However, Ms. Leung said this hadn’t flowed through to inflation pressures. Only a net 1% of businesses reported raising prices over the past quarter, a level not seen since early 2009. “These results suggest further interest rate cuts for the remainder of 2015,” she said.
She said the Reserve Bank is walking a “tightrope” between weakening activity and the fact that low interest rates will “only put further fuel on the Auckland housing market,” something she dubbed both a time bomb and an inferno.
She now expects a rate cute in July and September and said she wouldn’t rule out a third rate cut.
