New Zealand business confidence remains flat in the face of a slower than expected recovery during the last quarter of 2009.
The New Zealand Institute of Economic Research's quarterly survey of business opinion for the quarter to December, released yesterday, saw only a 1% increase on the previous quarter to 23% of companies expecting conditions to improve during the next six months.
"We are interpreting the survey results as cautiously optimistic. The economy is recovering, albeit at a slower pace than firms expected earlier," Shamubeel Eaqub, NZIER's principal economist, said in a statement.
Last week's result from bell-wether The Warehouse underpins the findings, in that the Red Shed retailer reported Christmas sales growth well down on expectations, prompting a "flat" result, and forecast its half-year tax profit would be similar to last year's $56.8 million.
"The flat-lining of confidence is consistent with businesses remaining optimistic, but waiting for reality to catch up with expectations," Mr Eaqub said.
Firms were optimistic about the economic outlook and their recent performance has been improving gradually, but the recovery to date has been slower than firms initially expected, he said.
ASB chief economist Nick Tuffley said the survey suggested the economic recovery had gained some momentum towards the end of 2009, after "very weak growth" in the second and third quarters of 2009.
"Nevertheless, the indications are that activity is still pretty weak, and any noticeable improvement is largely confined to manufacturing and building," Mr Tuffley said in a statement yesterday.
The results were in line with ASB expectations, in that the recovery had entered into a "gradual acceleration of growth rates rather than an explosive rebound", he said.
The Reserve Bank's forecast is of 0.6% growth for the fourth quarter in 2009, while the ASB forecast is 0.5%, with Mr Tuffley saying the survey results "look broadly consistent with those outcomes".
Mr Eaqub said profitability was improving, as costs had fallen more rapidly than selling prices.
Manufacturers led the way in profitability with the highest turnaround on record.
"The outlook is improving, with only a net 2% of firms expecting profits to decline in the March 2010 quarter.
Investment intentions are lifting in sync with improving sales and profitability," he said.
