Business

Business confidence up despite labour, supply constraints

13:39 pm on 6 July 2021

Business confidence has improved strongly across all sectors on the back of improved consumer and housing demand despite rising prices and supply disruptions.

New Zealand dollars Photo: 123RF

The NZ Institute of Economic Research's quarterly survey of business opinion showed a seasonally adjusted net 10 percent of firms expected conditions to improve over the near term, against an 8 percent pessimism reading in the previous survey.

"These results suggest the recovery in the New Zealand economy will remain robust over the coming year," NZIER principal economist Christina Leung said.

A quarter of firms reported a lift in business over the past three months, and a net 28 percent expected it to improve in the coming quarter.

Leung said the survey pointed to economic growth of about 4 percent for the year ended June.

However, businesses reported two major constraints -- finding suitably skilled labour and supply disruptions.

A record 69 percent said they were having trouble finding staff, and there were widespread reports of difficulty in getting raw materials or goods from suppliers .

Leung said inflation pressures were strengthening with a net 54 percent of respondents reporting higher prices in the past quarter, while more than half were expecting to raise prices in the next three months.

She said increasing numbers of businesses were finding it easier to pass on higher costs, which was boosting profit expectations but also inflation pressures.

"The increase in both costs and prices points to rising inflation pressures, which is underpinning expectations of interest rate increases from the Reserve Bank over the coming year."

Leung said the Reserve Bank could be expected to start raising the official cash rate towards the end of next year, which matches the central bank's own projections but is behind expectations of other analysts and financial markets, which are picking a start to rate rises early next year.