New Zealand business confidence remained steady in the second quarter at its highest level in three years, as the island nation's economy continues to show strength.The New Zealand Institute of Economic Research's Quarterly Survey of Business Opinion Tuesday showed confidence remained steady in seasonally adjusted terms, with a net 31% of firms now expecting business conditions to improve, matching the previous survey and the highest level since March 2010. The actual number of firms expecting business conditions to improve over the next six months rose sharply, with a net 32% now expecting general conditions to improve compared with a net 23% in the previous survey. "Businesses are hiring and investing more, a sign of continued momentum in the economic recovery. The recovery is still at an early stage, with few generalized shortages of labor or capacity," said Jean-Pierre de Raad, NZIER chief executive. Capacity utilization among the companies surveyed fell slightly to 91.3% from 91.5% in the first quarter, the institute said.Inflationary pressure, however, has picked up slightly--a total 29% of respondents expect prices to increase over the quarter, up from 16% in the prior quarter. Mr. de Raad said there is nothing in this survey that supports the country's central bank needing to increase the cash rate, with the institute continuing to expect the bank to hold the rate until mid-2014. However, he added that 30% of those surveyed expect the central bank to hike rates over the next year. The Reserve Bank of New Zealand has held the official cash rate at a record low 2.5% since March 2011 and most economists don't expect it to begin hiking rates until early 2014 at the earliest.
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