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Business confidence has fallen to its lowest level since the pandemic started as firms battle labour shortages, rising prices and interest rates, and face slowing demand.

Businesses are battling labour shortages.
Photo: 123rf

The Institute of Economic Research’s (NZIER) latest business survey shows a seasonally adjusted net 62 percent of respondents think conditions will deteriorate in the coming year compared with 34 percent in the previous survey.

A net 1 percent of firms reported a weaker trading performance in the past quarter from 11 percent, but 11 percent expected a downturn in the coming quarter from a positive reading in the previous quarter.

NZIER principal economist Christina Leung said a host of negative economic and commercial headwinds were taking a toll.

“While March quarter was about people having to stay at home because of Covid … the June quarter was more about the intensification of cost pressures and the headwinds from higher interest rates.”

She said the business mood was downbeat and demand was settling at a lower level.

The survey showed 78 percent of respondents faced increased costs, and there was a similar level of expectation of future price rises, while profits had fallen in the past quarter and a growing number expected that to remain the case in the coming quarter.

Leung said finding workers remained the biggest constraint on business, although firms were still.

The services and building sectors were the most pessimistic with rising inflation and interest rates being more keenly felt.

Leung said she was not currently expecting a recession for the economy but the survey showed that the risks were rising.

“There’s nothing in this survey to dissuade the Reserve Bank from slowing its pace of tightening.”

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