ANZ Business Outlook for May indicates stressed New Zealand economy

ANZ Business Outlook Survey analyses the course of the economy in the next year and shows how business confidence is stacking up, what export sales are up to, and how the labour market is doing, etc.

The survey collects crucial economic data, which relies on the inputs of New Zealand businesses that has proved good in accurately choosing economic trends.                                                               

The latest ANZ Business Outlook survey for May revealed that the New Zealand economy was grappling to keep up with demand, while cost and inflation pressures continue to build up.

Headline business confidence fell 5 points to +2%, while businesses' own activity was down 5 points to +27%, when compared to May preliminary readings. Though business sentiment and activity indicators were lower in the second half of the May sample, all indicators for the month as a whole were still higher than that of April.

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As per the survey, the majority of the second-half May responses were received on the Budget Day morning. Although the contents of the Budget were unknown at the time, it's plausible that the numbers were influenced by uncertainty.

Here are some of the findings of May’s Business outlook survey as compared to the month of April.

• Business confidence increased 4 points to net 1.8% (prelim: 7%)
• Firms’ own activity outlook climbed 5 points to 27.1% (prelim: 32.3%)
• Investment intentions rose 2 points to 18.9% (prelim: 20.8%)
• Employment intentions elevated 4 points to 20.5% (prelim: 22.1%)
• Export intentions increased 3 points to +12.2% (prelim: +14.9%)
• Profit expectations surged 4 points to 3.9% (prelim: 9.6%)

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Further, the percentage of people planning to build a home increased by two points to 20.8%. The percentage of people planning to build a commercial building increased by three points to 8.3%.

Cost and inflation pressures building

Cost expectations increased by 5 points in May, with a net 81.3% of respondents predicting higher expenses. A total of 57.4% of respondents plan to increase their pricing (prelim: 57.6%). Inflation forecasts have risen to 2.22%.

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ANZ economist Sharon Zollner noted that inflation pressures had been building up. She added that cost expectations and pricing intentions were significantly higher in comparison to the past across the economy. Profitability is constrained, owing to cost increases, while export plans are also lower than usual.

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Zollner stated that manufacturing, construction, and agriculture were all expected to have costs in the 90s, with retail not far behind. Services have been holding the aggregate down, with only a net 72% of enterprises expecting higher costs. However, freight interruptions continue to be a cause for concern.

She observed that Inflationary pressures were not abating but expectations were still hovering around RBNZ’s target range midpoint of 2%.

ANZ is due to release its preliminary June data on 9 June.