NZIER's June quarter business survey shows a net 59 percent of respondents think business conditions will worsen in the coming year. Photo: 123RF / Andrey Popov
Business sentiment has improved slightly but remains deeply pessimistic as inflation pressures remain strong and firms fear continued slowing in the economy.
The Institute of Economic Research's June quarter business survey shows a net 59 percent of respondents think economic conditions will get worse in the coming year.
That compares with a net 63 percent in the March survey.
Firms reported a decline in their own trading, and were still negative and cautious about the prospects for their profits and investments.
A net 13 percent of firms reported a fall in their trading in the past quarter from 10 percent in the previous survey.
But businesses reported they expected worse to come because of the slowdown with a net 17 percent forecasting a drop in their own business in the coming quarter compared to 8 percent in the previous quarter.
NZIER principal economist Christina Leung said the economic and commercial headwinds remained strong.
"The mood is subdued and firms are expecting tougher times."
She said the survey indicated the Reserve Bank's (RBNZ) rate rises were having a marked impact on dampening demand.
"Sales are now the primary constraint on business ... which reflects that higher rates are flowing through the broader economy."
The survey showed 70 percent of respondents faced increased costs and 65 percent expected future price rises, little changed from the previous quarter.
The number raising their prices was also 70 percent, but the number expecting to increase prices fell sharply to 48 percent.
"With a weaker outlook for demand, a smaller proportion of firms expect to raise prices," Leung said.
Labour shortages had eased, especially for unskilled labour, and there was a slight lift in firms expecting to hire staff, which Leung said showed the labour market remaining solid.
The retail sector was the most pessimistic as falling demand outweighed the feeling that cost pressures were easing.
Leung said the survey supported the RBNZ holding the official cash rate steady at next week's meeting.
"We believe this is the peak of the rate rises."