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Highlights
- Business confidence dips to 28 points
- Reflection of worries related to Omicron impact
- February is ninth straight month when business confidence was in negative
Business confidence slumped in the month of February as Omicron impact worries were top on the minds of the companies, according to ANZ Business confidence Survey. The Survey also pointed out that the pricing intentions of the companies also indicate that inflation could also increase in the coming period.
The bank said that the business confidence had gone down 28 points and 52 % of companies were not very hopeful.
The survey results were a reflection of the worries related to Omicron's impact on the businesses. Sharon Zollner, the chief economist at ANZ said that Russia’s invasion of Ukraine would further add to the woes.
Also Read: New Zealand central bank raises OCR by 25 bps, says more tightening ahead
Due to high inflation and cost escalations, the prices would further rise leading to high prices.
Source: © 2022 Kalkine Media®
The survey revealed that almost 75% of the companies signaled their intentions of increasing prices, up from 64% in ANZ's January survey. The companies are planning to increase costs despite less activity.
Also Read: Kiwis fret as fuel prices reach $3 per litre
The Omicron surge had proved disruptive but had not done anything to cool inflationary pressure. There was a demand-supply mismatch in the system. The cost pressures were building up which the companies were planning to pass on to the consumers.
RBNZ governor, Adrian Orr worried about inflation:
With inflation already at 5.9%, the RBNZ had no choice but to hike interest rates, and going forth, the Reserve Bank Governor Adrian Orr had signaled rapid rate hikes as inflation was a big cause of worry for the central bank.
The governor had indicated that The central bank would be taking his foot off the accelerator as quickly as possible to avoid using brakes unnecessarily in the future.
He had said on Friday that even though in this monetary policy review, he had raised the OCR by only 25 bps, he was looking at quick raises going ahead, due to rising inflationary pressures.
Several economists had expected at least a 50 bps rise in the OCR as inflation is at an all-time high of 5.9%.
Related Read: NZ Inflation at a record high, what should RBNZ do?
However, with new developments between Russia and Ukraine, there could be more imported inflation due to the rise in oil prices. Global inflation could have a major impact on the NZ prices, driving up the inflation to even 8%, according to the Survey.
The Business Confidence released by the ANZ reflects the business outlook in New Zealand. It shows a short-term analysis of the economy. The high reading indicates positive, and the low reading is seen as bearish. This was the ninth month when business confidence was down.
Bottom Line: ANZ Business Confidence has revealed that further price increases were on cards despite low activity. The business confidence had tanked due to worries of Omicron impact.
