The outlook for the residential construction sector was "deteriorating rapidly", said ANZ chief economist Sharon Zollner. Photo / NZME
The outlook for the residential construction sector was "deteriorating rapidly", said ANZ chief economist Sharon Zollner. Photo / NZME
Business confidence has fallen on "intense" inflation pressure, the latest ANZ Business Outlook survey shows.
While some sectors were holding up well with regards to employment and investment intentions, the outlook for the residential construction sector was "deteriorating rapidly", said ANZ chief economist Sharon Zollner.
The survey results suggested buildingconsents - still at historically high levels - were about to fall sharply.
Inflation and cost pressures remained intense, Zollner said.
But overall the data was consistent with CPI inflation peaking soon.
Firms were generally anticipating lower wage settlements next year than those seen in the past 12 months.
"The net proportion of firms intending to raise their prices in the next three months remains sky high, but it has dropped both this month and last," she said.
It was down from a March peak of 80.5 per cent to 71 per cent. There was also a slight easing in anticipated cost inflation.
"Firms are worried about the economic outlook, but employment and investment intentions are holding up relatively well," Zollner said.
However the outlook for residential construction was deteriorating rapidly, she said.
StatsNZ today released building consent data for the year to April.
Some 50,583 new homes were consented in the year ended April 2022. This was still a historically high level, up 18 per cent compared with the year ended April 2021, but down slightly from the last month's annual record.
There were 25,687 multi-unit homes consented in the year ended April 2022, up 33 per cent compared with the year ended April 2021.
There were 24,896 stand-alone houses consented over the same period (up 5.7 per cent).
"The survey data suggests the issuance of consents (and ultimately, building activity) is about to fall sharply," Zollner said.
"What is unclear, however, is how much of the fall is due to weaker demand, and how much is shortages of building supplies."
By sector, the sharpest cooling in activity indicators was in the manufacturing, services and construction sectors.
Retail and agriculture were more mixed.
"Overall, there was good news and bad news in the survey," Zollner said.
"The RBNZ will be pleased to see more early signs of cost and inflation pressures starting to top out, and a softer outlook for the highly stretched construction sector.
ANZ Bank chief economist Sharon Zollner. Photo / Dean Purcell
"On the other hand, margins are clearly very squeezed across the economy, and firms are increasingly worried about the economic outlook, as interest rates continue their relentless climb and the housing market screeches to a halt."
While the RNZ still had a big job to do tackling inflation, and the OCR likely needed to go much higher yet, they were now getting traction, she said.
"We expect rate hikes will revert to a more standard 25bp pace from August onwards as the balancing act between medium-term inflation risks and near-term growth risks becomes more nuanced than it is currently."
