NZIER QSBO shows business confidence resilient before ratings downgrade, RBNZ comments and global turmoil. Your experience?

The New Zealand Institute of Economic Research (NZIER) has published its Quarterly Survey of Business Opinion (QSBO) for the September quarter, which it said showed business confidence as resilient and indicated economic growth of around 1.5%.

However, it noted most of the survey responses were taken before New Zealand's double downgrade of its credit rating on Friday, before much of the recent global markets turmoil and before the Reserve Bank's September 15 Monetary Policy Statement.

NZIER said firms’ experienced trading activity was broadly unchanged at +2% from +3% in the March quarter on a seasonally adjusted basis.

“Activity was stable in the September quarter. Retail and services sectors picked up, but manufacturing and construction slowed. Canterbury is rebounding from the earthquake disruption, but the rest of the country is flat. Retailers are expecting a bumper end to 2011, which may be attributable to the Rugby World Cup," NZIER said.

“The survey shows a resilient economy heading into the latest phase of global economic uncertainty. However, most of the survey responses were received before the RBNZ’s interest rate announcement, our credit downgrades and the rapid deterioration in global sentiment. We expect that firms may now be more nervous than these results indicate” said Shamubeel Eaqub, Principal Economist at NZIER.

Canterbury was rebounding from the earthquake disruptions, with activity is picking up, particularly for retailers and builders. The services sector, which was hit hardest, continues to struggle, it said.

Investment intentions had soared in Canterbury with a surge in building investment intentions, but they were slowing elsewhere in the country.

"Firms remain cautious about expanding while demand remains patchy," NZIER said.

Easing costs and pricing intentions suggested inflation will be contained over coming quarters, NZIER said.

There is emerging inflation in the construction sector, with prices rising for the first time in three years. This may be related to the Canterbury rebuild. 

"Outside of the construction sector, inflationary pressures are subdued. Activity indicators are also flat outside of Canterbury. Heightened global tensions have already affected Australian business confidence, but Kiwi firms are still surprisingly optimistic," NZIER said.

"The RBNZ is clearly mindful of these risks and the OCR is likely to stay unchanged at 2.5% for some time."