New Zealand business outlook and demand weakens in Q4

WELLINGTON (Reuters) – New Zealand business confidence and demand dropped in the fourth quarter of last year as the COVID-19 outbreak dragged on, a private think tank said on Tuesday.

A net 28.0% of firms surveyed expected general business conditions to deteriorate compared with 11% pessimism in the previous quarter, the New Zealand Institute of Economic Research’s (NZIER) quarterly survey of business opinion (QSBO) showed.

On a seasonally adjusted basis, 34.0% expected business conditions to worsen, versus 11.0% pessimism recorded in the previous period. The survey’s measure of capacity utilisation dipped to 89.5%, from the previous quarter’s 96.1%.

Acute labour shortages triggered by pandemic restrictions are underpinning a lift in wage growth and this is contributing to higher costs for business, NZIER said in its report.

A net 61% reported increased costs in the December quarter, the highest level since June 2008, it said.

Inflation pressures are accelerating, the report said, suggesting a continued tightening of monetary policy by the central bank.

New Zealand’s central bank raised interest rates for the second straight month in November to keep surging consumer prices in check and warned of more hikes.

(Reporting by Praveen Menon; editing by Howard Goller)