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Trading activity rebounds in Canterbury - QSBO

Tuesday 5th July 2011

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Trading activity rebounded in Canterbury in the June quarter, after taking a hit from the February earthquake the previous quarter, while the rest of the country showed modest growth, the New Zealand Institute of Economic Research (NZIER) says.

Its quarterly survey of business opinion (QSBO) today, the NZIER said economic indicators remained mixed.

Business confidence had soared, with a seasonally adjusted net 31 percent of firms optimistic about the general business situation in the June quarter, compared to a net 11 percent who were pessimists in the March survey. Unadjusted a net 27 percent were optimistic, up from a net 27 percent pessimistic.

NZIER chief executive Jean-Pierre de Raad said signs of economic weakness remained, with hiring and overtime worked falling in the June quarter as a net 6 percent reported a fall in employment numbers after a net 2 percent had reported a rise in the March quarter.

Hiring intentions had rebounded, with a net 7 percent expecting to increase employment in the September quarter, mainly due to a sharp rise in Canterbury.

Domestic trading activity rose, seasonally adjusted, for a net 4 percent of firms, compared to a net 5 percent reporting declines in the March quarter.

Activity expectations for the September quarter rose, with a seasonally adjusted 20 percent expecting an increase, up from a net 6 percent in the March quarter.

Those figures were consistent with a flat economy in 2011, boosted by reconstruction in Canterbury later on, NZIER said.

In Canterbury, seasonally adjusted domestic trading activity rebounded, from a net 19 percent reporting a decrease in the March quarter, to a net 3 percent reporting a fall. The rest of the country rose to +3 percent from -3 percent.

Building investment intentions stabilised at an elevated level in Canterbury, unchanged at +24 percent, while the rest of the country remained flat at -9 percent.

Hiring intentions recovered in Canterbury to +22 percent from -22 percent, particularly builders needed for reconstruction work.

De Raad said that while business expectations and intentions for September had improved, there was yet to be a catalyst that transformed that confidence into hiring and investment.

"Local demand has strengthened while exports have stabilised, but demand is still the biggest constraint on businesses and margins are tight," he said.

"Continued deleveraging, slowing activity in Australia and a high exchange rate provide headwinds for economic growth."

The QSBO shows that while confidence in the services sector rebounded in the June quarter, financial firms continued to struggle after the February quake. Financial service firms recorded the lowest ever sales volumes since the series started in 1975.

Capacity utilisation of manufacturers and builders eased to 88.7 percent from 89.4 percent, NZIER said.

Firms were struggling to raise prices given subdued demand, and margins remained tight.

Canterbury reconstruction, and the fact firms were finding labour more difficult to find, pointed to medium term inflationary pressures.

NZPA



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