New Zealand business confidence plunged to a seven-month low in June with retail most gloomy as costs, credit and capacity weigh on firms.
A net 39 per cent of 341 firms surveyed in the ANZ business outlook survey expect general business conditions to deteriorate in the coming 12 months, 12 points lower than May's result and the lowest that measure has been since November 2017.
The survey has become a political football since the election as headline confidence has continued to weaken, with Finance Minister Grant Robertson saying he thinks it's an issue around perception and the survey is not historically correlated with GDP growth.
Companies are also typically more downbeat about the broader economy under a Labour administration, and ANZ stressed today that business sentiment "is only one input into the decision-making that drives the economy" and "firms' expectations of their own activity are a better gauge of future GDP growth."
That measure was today down but remained positive, with a net 9 per cent of firms predicting increased activity in their own business, from net 14 per cent last month.
Manufacturers were the most optimistic at net 16 per cent positive, while retailers were most gloomy at net 6 per cent.
"Our composite GDP growth indicator combines business expectations and intentions with consumer confidence. This remains expansionary (with robust consumer confidence providing support), but suggests the economy may continue gently losing steam over coming months, despite the support coming from fiscal stimulus and high commodity prices," ANZ said.
"Going forward, we expect tailwinds in the form of fiscal stimulus and strong terms of trade will see the economy continue to grow at about par. However, cost, credit and capacity headwinds have strengthened, and firms have noticed."
Today's survey shows hiring intentions dropped, with net 1 per cent of firms planning to take on new staff from net 7 per cent in May, and negative hiring intentions in construction and agriculture.
Profit expectations dropped 4 points to net 13 per cent negative, with retail the weakest sector.
A net 4 per cent of firms expect to increase their investment, up 1 point "but still low", ANZ said.
A net 27 per cent of firms intend to raise prices, up from 26 per cent in May, while inflation expectations rose to 2.3 per cent from 2.12 per cent.
ANZ said the biggest problem for survey respondents was a lack of skilled employment, with 28 per cent considering it their most important issue, and it was a particular issue amongst construction, manufacturing and services firms.
Some 17 per cent of firms said regulation was their biggest issue, the highest reading for this problem since this data started being collected in March 2012.