WELLINGTON (Reuters) - New Zealand business confidence was broadly steady in the second quarter of 2017 but a smaller number of firms intended to raise prices, reinforcing the central bank's determination to keep interest rates on hold.
A net 18 percent of firms surveyed expected general business conditions to improve compared with 17 percent in the previous quarter, the New Zealand Institute of Economic Research's quarterly survey of business opinion showed.
While growth was expected to average a solid 3 percent this year, firms were struggling to pass on higher costs to consumers and capacity pressures were easing.
"Although we continue to expect that underlying inflation will lift over the next two years, these recent developments add to the case that there is little urgency for the Reserve Bank to begin lifting interest rates," said NZIER economist Christina Leung.
The number of firms planning to increase prices fell to 24 percent in the second quarter from 29 percent in the first quarter, the survey showed.
A measure of capacity utilization by firms across sectors fell to 92.1 percent from 93.6 percent.
Confidence in the building sector eased with "labour shortages still very acute" and despite expectations for a pick-up in construction activity over the near-term, Leung said.
(Reporting by Ana Nicolaci da Costa and Charlotte Greenfield; Editing by Dan Grebler)
