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Firms see good times ahead

NZ NewswireNZ Newswire 4/07/2016

New Zealand firms turned optimistic about the state of the economy in the June quarter as moderating cost pressures helped boost margins and lifted profit expectations.

A seasonally adjusted net 18 per cent of firms surveyed in the New Zealand Institute of Economic Research's quarterly survey of business opinion expect general business to improve.

That was a vast improvement of the net 2 per cent of pessimistic responses three months earlier.

Around a fifth of those companies experienced stronger trading activity in the past quarter, and see more expansion in the coming three months, up from March figures.

Stronger profit expectations helped underpin the pick-up in confidence, with 16 per cent expecting more gains in the coming period while fewer companies faced higher costs in the June quarter.

"Moderating cost pressures and improved pricing power have seen an improvement in profitability amongst businesses," NZIER senior economist Christina Leung said.

"Demand held up over the quarter, against expectations earlier this year of a softening in demand."

The QSBO follows ANZ Bank New Zealand's business confidence survey last week, which showed optimism was at a six-month high in June as the country's booming tourism and construction sectors continued to support economic activity.

Ms Leung said the building pipeline was a key driver in the economy and expects gross domestic product will peak at 3 per cent in the June quarter, before moderating to 2.8 per cent by the end of the year.

But almost 40 per cent are finding it hard to find skilled staff.

"One thing to be watching out for is that skill shortages are becoming more acute, particularly in the building sector," Ms Leung said.

"That is definitely something that could be limiting the degree to which building activity can ramp up over the coming years."

The survey was held before the UK referendum on leaving the European Union and Australia's federal election.

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