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Business opinion heads south

NZN 4/04/2016 Paul McBeth

New Zealand businesses turned pessimistic about the state of the economy in the first three months of the year, as their inability to pass on rising costs squeezed margins.

A net 1 per cent of firms surveyed in the New Zealand Institute of Economic Research's quarterly survey of business opinion expect general business conditions to deteriorate.

Than compares to an optimistic net 13 per cent reading three months earlier.

A net 18 per cent of firms experienced better trading activity, unchanged from December, while just 6 per cent anticipate a pick up in trading compared to 20 per cent three months earlier.

"A key driver of this gloominess is that firms have consistently had their expectations of a pick-up in sales dashed in reality," senior economic Christina Leung said.

"Their optimism is starting to wane - firms now see weak demand ahead."

The QSBO follows ANZ Bank New Zealand's business confidence survey last week showing just 3 per cent of firms were optimistic about the economy, with a growing divide between an upbeat North Island and an increasingly gloomy South Island.

Ms Leung told a briefing in Wellington that the survey's pessimism suggested an increased risk the Reserve Bank will cut the official cash rate to 2 per cent in April, rather than wait until June.

The New Zealand dollar slipped to 67.99 US cents, from 68.25 cents immediately before the release of the survey.

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