NZIER’s Quarterly Survey of Business Opinion (QSBO) shows steady economic activity in the September 2011 quarter.

Firms’ experienced trading activity is broadly unchanged (+2% from +3%) on a seasonally adjusted basis. This is consistent with annual economic growth of around 1.5%.

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”.

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.

Canterbury rebounding from earthquake disruptions

Activity is picking up, particularly for retailers and builders. The services sector, which was hit hardest, continues to struggle. Investment intentions have soared in Canterbury, to replace lost capital. Building investment intentions have surged, but they are slowing elsewhere in the country. Firms remain cautious about expanding while demand remains patchy.

Contained inflation

Easing costs and pricing intentions suggest inflation will be contained over coming quarters. 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. The RBNZ is clearly mindful of these risks and the OCR is likely to stay unchanged at 2.5% for some time.