NZ Economy: The Recovery – Steady, Not Spectacular
April 14th, 2010
The latest Institute of Economic Research survey of business opinion shows the economy is getting better, but the recovery will be fragile and more gradual than businesses had hoped for. The worry is the recovery will benefit small businesses last, as the larger outfits race ahead. Seasonally adjusted, a net 5% of businesses say their own trading activity fell over the past three months.
But this is an improvement on the net 10% with falling activity in the December survey and a net 45% at the worst of the financial crisis a year ago. However it is still below the survey’s long-run average of a net 11% expanding. And there’s more bad news, with many firms still shedding jobs. A net 15% slashed staff compared with a net 18% in the previous survey.
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Ample spare capacity in the labour market means wage growth is likely to be restrained for some time, but the downside of this is weak household incomes and lower spending which will put the brakes on the recovery. The news is mixed in the manufacturing sector, with as many reporting a fall in output as those saying they’ve seen a rise. Cost and price pressures remain relatively subdued. Firms are lifting prices but not to the extent they expected.
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