Businesses are still downbeat about the economy, but an improvement in demand is seeing an optimistic outlook on business expansion, according to a business survey released today.
The NZIER Quarterly Survey of Business Opinion found 18 per cent of businesses expect a worsening in economic conditions over the next few months. However, this is a decrease from 28 per cent in the last quarter.
There was a lift in demand reported by businesses in the December quarter, which NZIER said was "making firms more optimistic about expanding".
Hiring intentions were also positive, but businesses were cautious in investing in new buildings.
Businesses are facing the pressure of rising costs, "and continue to find it difficult to pass these cost increases onto customers in the form of higher prices".
Twenty-two per cent reported a decrease in profitability.
"A net 15 per cent of businesses expect profitability to decline in the next quarter, the weakest level since March 2011."
Approximately 4300 firms are asked each quarter if they think business conditions will deteriorate, stay the same or improve.