Consumer confidence took a dive in March as recession headlines hit. Photo / Sylvie Whinray
Consumer confidence took a dive in March as recession headlines hit. Photo / Sylvie Whinray
Both business and consumer confidence have slumped in the past month, according to the latest surveys by ANZ.
“The March ANZ Business Outlook survey showed weakening activity indicators and a slight fall in inflation pressures”, ANZ chief economist Sharon Zollner said.
Business confidence fell 12 points to +23 inMarch, expected own activity fell 7 points to +23. Past activity eased 2 points to -7.
Meanwhile, ANZ-Roy Morgan consumer confidence fell 9 points in March to 86.4, with a fall across most questions, likely affected by recession headlines, Zollner said.
Late-month responses were markedly weaker than those that preceded the GDP data, she noted.
For business, the survey showed the construction sector experiencing the largest fall in activity, followed by retail, but the picture for retail appeared to be brightening.
That’s made for an interesting contrast with the sharp fall in consumer confidence, Zollner said.
“Strong population growth likely helps explain the discrepancy – even though consumers are warier, there are now a lot more of them.”
A wide regional divergence was evident in the anecdotes collected in the business survey this month, with Wellington an outlier on the downside.
This was also evident in this survey, Zollner said, in that the Wellington region, with its core public sector workers, “is often somewhat insulated from the business cycle, but is in the thick of job losses now (noting this survey consists mainly of private sector firms)”.
On inflation; cost expectations and the number of firms expecting to raise wages over the next year both ticked higher this month.
ANZ chief economist Sharon Zollner.
But more encouragingly, pricing intentions dipped slightly, and inflation expectations went under 4 per cent for the first time since late-2021, Zollner said.
“Firms’ numerical estimates of where their own selling prices will be in three months’ time continues to trend down with a lift for the retail sector outweighed by falls elsewhere,” she said.
“While the proportion of firms expecting higher costs is going sideways, the magnitude of those expected cost increases, while still high, is falling steadily.”
The construction sector had the lowest cost expectations, which should please the RBNZ, given how much construction costs have added to inflation in recent years, she said,
Reported past wage increases (versus a year earlier) were flat. Expectations for wage settlements over the next 12 months ticked down from 3.4 per cent to 3.3 per cent.
ANZ asks firms every three months what is driving their investment decisions.
“The economic outlook dominates, unsurprisingly, but there are some other interesting nuances,” Zollner said.
“Labour shortages are now much less important as a reason for investing, while interest rates are indeed increasingly constraining investment as the RBNZ intends.”
Firms are also asked to rank their largest problems.
“Inflationary problems (finding labour, high wages, high other costs, and regulation and paperwork) continue to decline, ceding ground to the disinflationary problems of low turnover and competition. Interest rates have also grown as a problem, unsurprisingly,” Zollner said.
It was clear that there was increasing nervousness creeping through the business sector, said Westpac senior economist Satish Ranchhod.
“Overall, today’s survey is in line with our expectations for soft activity and slowing inflation. The key issue to watch going forward is how quickly inflation drops back.”
On the consumer confidence results, Zollner noted that despite obviously being affected by recession headlines, “in the bigger picture, the economy really struggled in the second half of last year, especially on a per capita basis, and the labour market is increasingly showing the impact of that”.
“For the majority of people, the labour market is the business cycle: wage increases, job security, the ease of finding a new job – and all are heading south.”
Even if, in GDP terms, the economy was now past the worst, (as ANZ expects) the labour market would continue to soften for some time yet, given the usual lags in the dynamics between overall activity and the labour market, she said.
