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Business profitability "deteriorating again"

05 Oct 2010

The New Zealand Institute of Economic Research’s Quarterly Survey of Business Opinion has reported that the economy contracted in September, after stalling in June.

NZIER says there was a synchronised slowdown across regions and sectors with construction and financial services slowing the sharpest. Manufacturing exports held steady at barely positive and there was no evidence of a pre-GST spend up at shops.

“Large firms, which had been recovering strongly, fell sharply, and small firms remained in the doldrums,” says an NZIER release. “Business profitability is deteriorating again; highly unusual for this stage of the recovery. This may weigh on future hiring and investment – although hiring and investment intentions remain encouragingly resilient.”

Shamubeel Eaqub, Principal Economist at NZIER, explained, “Activity contracted and expectations are being revised down. The recovery continues to disappoint optimistic expectations. Seasonally adjusted business confidence fell from 26% to -9%, the first negative reading in a year. Renewed weakness in activity, profits and a shallow recovery have depressed confidence.”

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