Financiers see fall in interest rates

Press, 4 November 1986, Page 25

Financiers see fall in interest rates

PA Wellington Finance companies expect interest rates to fall during the next year, a quarterly survey of business opinion says. The N.Z. Institute of Economic Research September survey said a net 85 per cent of financial service businesses questioned were expecting rates to ease. The survey, which is conducted using postal questionnaires sent to 800 businesses, said the economy may have passed through a trough and be poised to move into an upswing. The nature and timing of the recovery could become clearer in the next quarter.

It said business confidence over all showed a “very marginal improvement” after the big lift registered in the last survey, but noted that more than one third of respondents expected a deter-

ioration in the general business situation over the next six months. Fewer manufacturers reported declines in activity and they were positive about the next three months. Builders reported slight increases in output and domestic deliveries, but were expecting a more widespread decline in the coming quarter. Merchants reported “significant” domestic sales increases in the quarter, but had become "marginally pessimistic” about December quarter sales.

Service industries (including the financial sector), which reported buoyant trading conditions, were optimistic about the economy for the first time since December 1984. Output was expected to grow in the coming quarter.

Nearly two-thirds of respondents reported low demand as the greatest impediment to boosting trading activity, while ac-

celerated de-stocking of raw materials and finished goods was a prominent feature.

The level of spare capacity in the economy remained at a cyclically high level, but could be expected to reduce considerably across the December quarter if previous trends were repeated.

Profitability was still low, but a smaller proportion of respondents reported falling profits than six months ago.

Reductions in numbers employed and the level of overtime continued to fall, although at a slower rate than in the June quarter. Availability in terms of skills and experience was still visible. “Skilled labour continues to become more difficult to recruit while semi-skilled and unskilled labour continues to become easier to recruit,” the survey said.