Capital shakes off the quake

"It does appear that the effect of the earthquake has been fairly modest across the region." Christina Leung, NZIER senior economist

Businesses appear to be shrugging off the impact of the November 14 earthquake, with confidence in the capital at a two-year high.

The New Zealand Institute of Economic Research’s quarterly survey of business opinion (QSBO) for December found a net 26 per cent of businesses expect business conditions to improve over the coming year.

Confidence remained robust in most regions, with increases in both the South Island and Wellington, despite disruption to the capital from the quake.

A net 33 per cent of businesses surveyed in the Wellington region expect conditions to improve in the coming months, the strongest reading since September 2014.

‘‘It does appear that the effect of the earthquake has been fairly modest across the [Wellington] region,’’ NZIER senior economist Christina Leung said.

Wellington mayor Justin Lester said the QSBO results were ‘‘encouraging’’ and it was clear the capital had been performing strongly for some time. ‘‘It’s been a real disruption for many people, and it’s great to see our businesses have been resilient.’’

Other surveys have pointed to a much weaker outlook for the capital. On Monday a Wellington Chamber of Commerce survey showed a sharp drop in the number of businesses expecting conditions to improve in Wellington.

Across New Zealand, the number of firms expecting their own activity to improve – generally seen as a better guide to economic growth – eased off in the QSBO.

A net 25 per cent of businesses expect to see increased activity in the coming quarter, down from a net 32 per cent in the September 2016 quarter, NZIER said.

The survey also pointed to some signs of a return of inflation, which has been below target for about five years.

A net 7 per cent of businesses said they had increased prices in the quarter, the largest proportion of businesses increasing prices in two years, while a net 22 per cent indicated a plan to increase prices in the coming quarter.

Bank of New Zealand forecast annual inflation will rise towards 2 per cent by March, while NZIER expects inflation to come close to 2 per cent by the end of the year.

Westpac said the main sector predicting price increases was the services sector. ‘‘[T]he rise in expected prices likely [reflects] the rising mortgage rate environment, rather than a rise in general inflation pressure,’’ Westpac economist Sarah Drought said.