Two interest rate rises in quick succession from the Reserve Bank have failed to put any sort of major dent in the high levels of confidence being experienced by Kiwi businesses.
This is according to the ANZ's latest Business Outlook Survey.
Here is the table of results of the latest survey, along with the full media release from the ANZ:
The OCR is moving up, yet economic optimists continue to dwarf pessimists. On the eve of the duck shooting season, we sit in our maimai and ponder how many more salvos will be needed before a hit is taken. A net 65 percent of firms are optimistic about general prospects.
That’s down a tad on the month prior for a second successive month, but we’re still talking elevated levels of confidence.
Survey indicators remain well north of historical averages and in most instances are in the upper quartile.
- Firms’ activity expectations regarding their own business eased from +58 to +53, but that’s still almost double the long-run average.
- Expected profitability has now fallen for two months, but at +36 still augurs well for investment and employment; firms need to be making money for investment and employment decisions to become real.
- A net 30 percent of businesses expect to be hiring more staff.
- Investment intentions dipped from +31 to +30. That’s a blip.
- Despite the elevated NZD, export intentions bucked the general trend, lifting from +32 to +34.
- A net 62 percent of firms expect an uplift in residential construction activity and a net 50 percent for commercial construction, both rising versus the month prior.
We can’t see evidence of a material turn across the economy despite interest rates moving up (with prospects of more to come) and the New Zealand dollar remaining elevated.
Rather, the economy appears firmly stuck in the groove of a firm economic expansion despite financial conditions tightening of late.
Our composite growth measure is still signalling the potential for 6 percent growth. The economy doesn’t have anywhere near the resource capacity for that rate to be achieved. However, we’ll side with the vibe; the economy is trundling along nicely.
With the economy firmly into an expansion and interest rates on the ascent (a net 86 percent expect them to move up further), the challenge remains to settle into the glide-path of a durable and sustainable upswing.
At this juncture there are three potential reasons things could misfire:
- Rising inflation necessitates an adverse monetary policy response.
- An offshore event materialises. Forget antics in Ukraine, the real risk for New Zealand that’s manifesting across emerging market economies is what is brewing in China.
- The complacency gene resurfaces.
These risks look manageable. Inflation is rising, but gradually. The NZD will fall on an offshore event, and interest rates will not rise in that instance; we have shock absorbers in the wings.
The complacency gene remains at bay.
You never say never, but New Zealand remains on track to be one of the strongest performers in the OECD.