Overall confidence remains stagnant. Photo / 123rf
Business confidence was unchanged in September, with a net 50% expecting better business conditions ahead, the latest ANZ Business Outlook survey showed.
ANZ chief economist Sharon Zollner noted that the result was impacted by the ugly second-quarter GDP result in the middle of the month.
“Around mid-month, [second-quarter] GDP data was released showing that the economy shrank much more than anticipated, which generated a flurry of negative headlines,” she said.
“It appears that the news did hit confidence. The late-month responses are more volatile by dint of being a smaller sample, but it’s a pretty consistent story.”
There was also evidence of a hit to consumer confidence in the survey released last Friday, she said.
On the positive side, the survey did show “expected own activity” rose four points to net 43%, its highest level in five months.
Firms’ past own activity lifted four points to +5 while past employment lifted one point to -11.
Zollner said that the own-activity indicators were generally lower in the late-month (post-GDP) sample.
Inflation indicators were marginally higher in September.
The net per cent of firms expecting to raise prices in the next three months rose three points to 46% while those expecting cost increases rose one point to 75%.
One-year-ahead inflation expectations lifted marginally from 2.63% to 2.71%.
Westpac senior economist Michael Gordon described the result as: “slightly stronger on balance” compared to August.
“Firms’ optimism about the year ahead remains elevated compared to current conditions, and even the small number of responses that were received after the June quarter GDP shocker were relatively positive,” he said.
“The RBNZ’s pivot in August to signalling further rate cuts will have been fully captured for the first time in this month’s survey.”
Every three months ANZ asks firms to rank their largest problems.
Non-wage costs grew in importance as a problem, in September while interest rates reduced.
Overall, though the disinflationary issues of competition and low turnover still dominated the inflationary problems of high wages and other costs, Zollner said.
Cashflow/debtors and access to finance ranked as low problems, which was an encouraging sign for the eventual recovery once confidence returned, she said.
“It’s been a rough few years. To some extent, that was inevitable after the extreme overheating of the Covid era, but the weakness has dragged on longer than expected, and the costs are mounting,” she said.
“It’s important to acknowledge that there have also been benefits. New Zealand’s external balances have improved enormously as we’ve started living within our means again, which sets us up well for the future.”
Inflation had also dropped sharply and the extreme damage done to housing affordability (in terms of house prices relative to incomes in the last boom) had been fully unwound.
“But now we’ve taken our medicine, firms would like to see things return to growth mode,“ Zollner said.
“The good news is that the RBNZ is now seeing things that way as well, and is set to backstop the growth outlook with a lower Official Cash Rate (OCR).
“While there’s uncertainty about the exact path of the OCR over coming weeks and months, the upshot is it will get to wherever it needs to be to ensure that the recovery we are all forecasting happens.”
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.