Newstalk ZB
Business confidence slumped again in May, according to the latest ANZ survey. ANZ’s Business Outlook Survey showed confidence fell from 32.5 in March to -10.6 in April. But if it is any consolation, ANZ chief economist Sharon Zollner highlighted that the slump was not quite as pronounced as the responses recorded in the last week of the March survey. “Firms are understandably concerned about the outlook for their activity and profitability in the face of this significant cost shock,” she said. “But although the charts are ugly, many activity indicators were actually higher this month than in the late-month responses received last month, suggesting some of the initial confidence shock has dissipated.” However, it remained a very challenging time to run a business and the uncertainty of the outlook would likely see some hiring and investment decisions put on hold, she said. Firms’ expectations of where inflation is headed rose from 3.1% to 3.8%, but “for the RBNZ [Reserve Bank] was about as benign as they could reasonably hope”, Zollner said. “It’s early days of course, but constrained wage-setting intentions and steady pricing intentions provide a small degree of reassurance in the face of rising cost and inflation expectations.” But inflation indicators continued to trend higher, unsurprisingly, with a sharp lift in expected costs and inflation expectations, Zollner said – though pricing intentions dipped slightly in the month, showing that uncertainty about future inflation was also rising. “Uncertainty about future inflation makes firms’ decision-making and planning more difficult,” she said. Firms’ average numerical expected costs and price changes over the next three months were both rising, the former by considerably more (4.6% versus 2.4%). “That implies a degree of expected margin squeeze similar to 2022,” Zollner said. Firms’ own past activity, the best indicator of gross domestic product (GDP) in the survey, was steady in April, with mixed moves in the various sectors. Agriculture remained the strongest sector, followed by manufacturing. Reported past employment rose, with manufacturing leading the charge by quite some way, Zollner said. “The relative strength in the demand for manufactured goods might reflect people stocking up various inputs to production or other items in anticipation of potential higher prices and/or reduced availability later.” Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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