WELLINGTON: New Zealand business confidence hovered around a 14-year high in the first quarter on broad-based economic growth, a private think tank said, feeding expectations that interest rates will rise steadily over the next two years.
A net 52 percent of firms surveyed expected general business conditions to improve, from an upwardly revised 53 percent in the previous quarter, which was the highest since 1999, the New Zealand Institute of Economic Research said in its quarterly survey of business opinion (QSBO) on Tuesday.
"The underlying trend in the economy is very, very strong everything is going up, broadening across regions and industries," said Shamubeel Eaqub, principal economist at the NZIER.
"We're finally starting to see this persistent optimism now being realised into activity, into hiring, into investment, and also pricing intentions."
On a seasonally adjusted basis, a net 52 percent of firms expected general business conditions to pick up, unchanged from the previous survey and the highest since June 1994.
The poll's measure of capacity utilisation was 89.4 percent, slipping from an upwardly revised 90.9 percent in the fourth quarter due to a rise in spare capacity among manufacturers in the Canterbury region.
The survey showed business optimism was reflecting the widening of growth beyond the boom seen in the Canterbury region, where earthquake rebuilding projects are underway.
The survey does not include the important agricultural sector, notably dairying, which has been driven by strong growth in commodity prices and demand.
A net 87 percent of financial services sector firms expected interest rates to rise, compared with a revised 69 percent the previous quarter. Pricing intentions also rose.
Last month, the Reserve Bank of New Zealand lifted official rates by 25 basis points to 2.75 percent. Rates had been on hold at a record low for three years, but investors expect them to march higher.
Markets are pricing in 118 basis points of tightening in the next 12 months.
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