The Institute of Economic Research’s (NZIER) widely tracked Quarterly Business Survey for the three months to December revealed a net 39% of respondents expecting improved economic conditions ahead.
“There is a turnaround in demand, with lower interest rates finally gaining traction,” NZIER principal economist Christina Leung said.
Weak sales remained businesses’ top constraint, though pressures eased with just 3% reporting quarterly declines.
Respondents anticipated stronger growth next quarter, with a net 23% expecting their own businesses to expand, rising from 10% in the prior quarter.
According to Leung, businesses were growing more confident about investing in plants and machinery, as well as hiring additional staff.
She added, however, that firms were facing growing challenges in recruiting skilled workers for manufacturing and construction, signalling potential labour shortages ahead.
Inflation pressures were also easing, with fewer firms anticipating higher costs or the need to raise prices, pointing to inflation settling toward the middle of the Reserve Bank’s 1-3% target band.
All in all, the survey signals an economic recovery, though growth is picking up more slowly than expected, with annual expansion around 1.4%.
Leung said with the demand recovering yet inflation staying contained, no additional OCR cuts are anticipated in the current monetary policy cycle.