Firms are shaking off their pessimism about the looming recession and even the near-term employment picture improved markedly in ANZ Bank's preliminary July business outlook survey.

A net 6.8 per cent of firms now expect lower activity for their own business in the year ahead, 19.1 points higher than in the June survey.

Headline business confidence also improved, with a net 29.8 per cent of firms predicting a downbeat economy versus net 34.4 per cent pessimism in the prior survey.

On the employment front, a net 15.3 per cent of firms expect to cut jobs, versus 34.7 per cent last month and a net 21.4 per cent of firms report having fewer staff than in the same month a year ago versus 37.4 per cent in the June survey.


The results are somewhat at odds with the gloomier view reported in this week's NZ Institute of Economic Research quarterly survey of business opinion, whose measurements were made earlier than ANZ's early July sample, which is a 'flash' reading that does not constitute a final result for the month.

"New Zealand is in an enviable position, touch wood, with activity largely back to normal, as demonstrated by traffic and spending data and many other indicators," said ANZ Bank senior economist Miles Workman.

ASB Bank economist Jane Turner said the improvement in business confidence was "stunning" and suggested an upside risk to economic forecasts to what's expected to be a deep recession.

"Our forecasts implicitly assume business confidence will backslide from early July's optimism. Nonetheless, the strength of these results, along with real-time activity indicators, do highlight that economic activity has bounced back with a gusto not expected by most economists," Turner said in a note.

ASB had already tweaked its forecast for gross domestic product due to the strong recovery in consumer spending once the lockdown ended, and currently forecasts GDP to shrink 5 per cent this year, having previously predicted a 7 per cent contraction.

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While a weaker labour market should weigh on growth, Turner said if business and consumer confidence can be maintained, and unemployment doesn't rise as sharply as feared, then she may revise the forecast further.

Earlier today, ANZ's Truckometer gauge, which uses car and truck movements to measure economic activity, showed overall traffic is nearly back to year-ago levels.

The light traffic index lifted 28 per cent in June while the heavy traffic index was up 14.5 per cent.


Meanwhile, the business outlook survey showed a net 4.5 per cent of firms expect to reduce investment versus a net 20.5 per cent in the prior survey, and a net 25.8 per cent expect lower profits versus a net 46.8 per cent in the June survey.

Workman warned, however, that while NZ is enjoying a sharp bounce out of lockdown, "an inconvenient truth remains – there's a very large economic hole where tourism used to be."

ANZ is expecting NZ's economy to contract between 5 per cent and 12 per cent over the year.

The full month results for the July survey will be released on July 30.