Business confidence continued to recover in June. Photo / NZME
Business confidence continued to recover in June. Photo / NZME
Business confidence has continued to lift, rising five points in July to -13, the highest read since September 2021, the latest ANZ Business Outlook Survey shows.
But expected own activity, usually considered a better predictor of the economic outlook, eased two points to +1.
“The economy is slowing, but certainlynot coming to a sudden stop. Activity indicators were a mixed bag in July, but broadly, the gains from the previous month were more or less maintained”, said ANZ chief economist Sharon Zollner.
The survey showed lifts in business confidence, export intentions, and residential construction intentions, but expected own activity slipped.
Employment intentions, investment intentions, capacity utilisation and profit expectations were all largely unchanged.
“Firms remain wary, with most activity indicators subdued. At the same time, though, most are well off their lows of late last year,” Zollner said.
“The RBNZ is banking on the economy rolling over rapidly; we’re not convinced things are quite that weak.”
Fiscal stimulus, population growth, solid household income growth, and now a bottoming housing market, were meaningful offsets to the lagged impacts of tighter monetary policy, weakening export demand, and cost-of-living pressures, she said.
“We are forecasting a recession and associated rising unemployment – we could hardly be accused of wild optimism. But we’d characterise things as currently patchy rather than capitulating.”
Inflation expectations and pricing intentions continued to ease slowly but steadily.
The proportion of firms reporting higher costs ticked up slightly, but that followed the largest fall last month.
The downward trend remained intact, Zollner said.
A net 62 per cent of firms in the retail sector said they expected to lift their prices in the next three months.
“That’s high, but it’s the lowest read since March 2021,” Zollner said.
“When it comes to specific numerical estimates of where firms’ own selling prices will be in three months’ time, the average read was markedly lower at 2.4 per cent, and they are trending lower across all sectors.
The economy-wide cost measure ticked up slightly to 4.3 per cent, with lifts for agriculture and services offset by falls for retail, manufacturing and construction.
“The data imply that on average, firms continue to expect margin compression, given costs are expected to lift more than prices over the next three months.
“Wage growth is a key determinant of the persistence of non-tradable inflation. Reported past wage increases (versus a year earlier) fell to 5.5 per cent, easing in every sector.
ANZ Bank chief economist Sharon Zollner. Photo / Dean Purcell
“Expectations for wage settlements for the next 12 months ticked down to 4.1 per cent and continue to trend lower.
“Overall, a net 82 per cent of respondents reported expecting to raise wages over the next 12 months. That’s up slightly from June, but well off its peak of 94 per cent in June last year.
“Firms continue to anticipate that they will raise wages by considerably less in the next 12 months than they did in the last”.
The retail, manufacturing and services sectors saw the most marked improvement in activity indicators over the month (apart from a sharp fall in manufacturing sector investment intentions).
The construction and agriculture sectors saw the biggest falls in activity indicators over the month, but there were exceptions here too: sharply higher residential construction intentions and stronger agriculture sector employment (particularly forward-looking intentions, though reported employment also rose.
