Adds comments and details throughout from NZIER
By Lucy Craymer
WELLINGTON, July 2 (Reuters) - New Zealand's business confidence deteriorated further in the second quarter as higher interest rates continued to dampen demand across the country, a private think tank said on Tuesday.
A net 44% of firms surveyed expected general business conditions to deteriorate, up from 25% that expressed pessimism in the previous quarter, the New Zealand Institute of Economic Research's quarterly survey of business opinion showed. Business confidence has been pessimistic since the third quarter of 2021.
On a seasonally adjusted basis, 35% expected business conditions to worsen, up from 25% pessimism recorded in the previous period. The survey's measure of capacity utilization fell to 88.7%, from the previous quarter's 90.2%.
Christina Leung, Principal Economist at NZIER told a news conference they estimate the central bank will start cutting the official cash rate in May 2025 but recognise that the results from the survey do present some risks the central bank will start easing sooner.
NZIER said overall the result suggests potential for a continued slowing in New Zealand’s economy over the coming year on the back of higher interest rates and heightened uncertainty.
The report notes that cost and pricing indicators suggest a further easing in inflation, with pricing power particularly weak in the building and manufacturing sectors.
“The easing in these indicators suggests higher interest rates are continuing to gain traction in reining in inflation in New Zealand’s economy,” it noted. It continues to forecast annual inflation to ease to the Reserve Bank of New Zealand’s (RBNZ) 1% to 3% inflation target band in the second half of this year.
The central bank has been battling historically high levels of inflation and in May indicated the risk of a further rate hike if it felt inflation pressures were not easing.
(Reporting by Lucy Craymer; Editing by Leslie Adler and David Gregorio)
((Lucy.Craymer@thomsonreuters.com [Lucy.Craymer@thomsonreuters.com];))
