-- Business confidence in New Zealand declined in the March quarter, as the US-Israel war with Iran fanned fuel prices and caused supply-chain disruptions amid worsening uncertainty around the Strait of Hormuz, New Zealand Institute of Economic Research (NZIER) said on Tuesday.
The NZIER Quarterly Survey of Business Opinion (QSBO) showed that only a net 1% of firms expected better general economic conditions in the coming months on a seasonally adjusted basis, a sharp fall from 39% in the December quarter.
Firms' own trading activity came in flat, an upturn from a 3% drop in the prior quarter. In contrast, around 9% of firms reduced staffing during the quarter, and 5% intend to cut headcount in the next quarter amid broader plans to reduce investment in buildings, plant and machinery.
"Although firms' domestic trading activity remained stable in the March quarter, the ongoing US-Israel war against Iran poses a risk to the fragile recovery that had been taking shape in the New Zealand economy late last year," the think tank said in a statement.
Sentiment was mixed across sectors, with building firms the most downbeat, as 28% expected deterioration in economic outlook. Manufacturing remained the most upbeat, with 34% of firms anticipating improvement.
NZIER continues to believe the central bank will start its tightening cycle with a first 25 basis-point official cash rate increase in July.