Business confidence improves despite extended Covid restrictions

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Businesses are feeling less pessimistic despite the Auckland Covid-19 outbreak dragging on.

The ANZ New Zealand Business Outlook for September shows a net 7.2 percent are pessimistic, an improvement on the 14.2 percent who were pessimistic in August.

But ANZ chief economist Sharon Zollner said the own activity outlook was remarkably robust with a net 18 percent confident, in the belief that demand will bounce back.

“Basically it does seem that businesses are looking through the current lockdown, knowing that we’ve been here before and what we’re seeing both here and overseas is that demand does tend to bounce back pretty vigourously, as long as that fiscal support is there to help everyone to get through it,” Zollner said.

She said that was the expectation this time as well.

“That said here we are, nearly 50 days into the lockdown and the path ahead is still pretty murky and the longer that uncertainty persists, then the risk is we do see those forward looking sentiments and activity indicators start to slip, but for now, they’re looking remarkably robust.”

But profit expectations and investment intentions are down in the face of high cost and inflation pressures, highlighting that business conditions remained tough.

“Inflation expectations amongst businesses are sitting right at the top of the Reserve Bank’s target band at around three percent.

“Household expectations are considerably higher, they always are but they’ve jumped a lot at 1.5 percent. And they do matter because they will impact both firms’ ability to pass costs through, if people are expecting inflation you’ll get less push back when you do raise them. But also wage negotiations in what’s a very tight labour market.”

Globally, everything was pointing towards higher inflation, she said.

“There’s a lot of global inflation in the pipeline and it’s becoming more and more difficult for central banks to argue that it’s just temporary.”

The Business Outlook also showed a slight improvement on the credit front, with perceptions on accessing credit slightly improving.

A net 50.3 percent were pessimistic about ease of credit expectations, slightly better than the 52.6 percent in August.

Economist Cameron Bagrie said it was a “small step” forward, but it was the third worst reading on record.

“This is within the context within the overall survey where activity and various indicators are holding up pretty well, Covid circumstances considered,” he said.

SOURCE: RNZ News

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