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IT relatively buoyant in uncertain economy

IT relatively buoyant in uncertain economy

Reports cast overall sobering economic picture for New Zealand

New Zealand's information technology sector expects to add permanent staff in the first quarter this year. But employee confidence is down from previous quarters, reflecting general uncertainty about the country's economic future.

According to a report released today by HR recruiting firm Hudson, 18 percent of employers surveyed planned to increase permanent headcount between January and March this year, down 4.6 percentage points on last quarter, and down 6.4 points the same period last year.

Of the 16 sectors surveyed, Hudson deemed information technology the most confident with 44.7 percent of hiring managers intending to increase the number of permanent employees in the first quarter of 2012.

The report is based on interviews with 1,120 employers throughout the country on expectations for the January to March quarter.

The report was released about the same time as the Quarterly Survey of Business Opinion (QSBO) released by the New Zealand Institute of Economic Research suggesting the economy is losing momentum, with a smaller than expected boost from the Rugby World Cup creating the risk of a decline at the start of this year.

The QSBO showed a net 1 percent of firms surveyed had reported a fall in activity, down from a net 4 percent reporting an increase three months ago. Canterbury, seeing a boost from the earthquake recovery, showed an increase but the rest of New Zealand reported a fall in demand. While the economy is still growing, NZIER says the figures implied annual growth of just 1.6 percent in 2011 and there was "growing risk" of weakness in the first half of this year. Strong growth in the third quarter of 2011 was based on a build up in inventories as companies expected a major sales boost from the Rugby World Cup, which never materialised. This was likely to lead to a weak start to 2012 as stock is cleared, possibly leading to contraction. While Eaqub says a return to recession was not NZIER's central forecast, he put the risk at around 20 to 25 percent. "Canterbury is rebounding from the earthquake disruption, but the rest of the country is slowing," says NZIER's principal economist Shamubeel Eaqub. "Retailers' very strong expectations for the December quarter, which may have been related to the Rugby World Cup, did not materialise." The survey was taken before Christmas, meaning the biggest trading period for many companies was not captured. While the survey showed both hiring and hiring intentions remained positive, "this is a very Canterbury-centric story", Eaqub says, with the region also showing a surge in investment intentions. This was reflected in Hudson's report, which showed hiring intentions in the South Island are at an eight-year high, with more than 40 percent of employers planning to increase headcount this quarter. The influx of government and insurance money is contributing to a sustained economic rebuild in that region. Hudson characterises hiring intentions for the rest of the country as "subdued". The QSBO results have led the organisation to suggest the Reserve Bank could leave the Official Cash Rate, currently 2.5 percent, on hold into next year "and possibly longer", Eaqub says. "Until we see clear evidence that the economy is growing and that inflation is rising I don't think that the Reserve Bank will be raising interest rates,'' Eaqub says. Another cut was unlikely.


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