ANZ Business Outlook for March makes for 'dreadful reading'

ANZ Business Outlook for March makes for 'dreadful reading'

It's "dreadful" and "we are on a very steep slide indeed". That's the short story from The ANZ Business Outlook Survey for March.

This is the full survey for the month. A partial summary of early results was issued earlier in the month.

In releasing the full month's results on Tuesday, ANZ said that about two thirds of responses were received at the very start of the month, and were reported in its preliminary Flash release on 10 March. The full results now reported include those results plus the one third following a reminder email sent on 19 March. The first sample group scored -55% for business confidence; the second sample reported -81%. Similarly, 15% of firms responding early in the month expected weaker activity ahead for their own firm; 55% of the later sample did. 

Here's what ANZ had to say about the full results:

The March ANZ Business Outlook Survey made for dreadful reading. Headline business confidence plummeted 45 points to -64 in March, close to a record low.

A net 27% of firms expect weaker activity for their own business (down 39), the lowest read ever (the survey began in 1988).

"We’re on a very steep slide indeed," ANZ Chief Economist, Sharon Zollner said.

"Responses received later in the month versus the early-sample results show that we are still on the slide – even with some series at record lows it seems unlikely we’ve seen the bottom."

Turning to the detail:

·Retail sector own activity collapsed 56 points from +15 to -41. Services and construction also plummeted by more than 40 points.

·Employment intentions fell 24 points to a net 23% of firms intending to reduce employment. Every sector is deeply in the red, but retail (-35) is the bleakest.

·Investment intentions fell 21 points to net negative 14%, and remain lowest for agriculture, with retail close behind. Investment intentions overall were -6 in the early sample and -37 in the later sample.

·Capacity utilisation, one of the best GDP indicators in the survey, crashed from +10 to -9, and was -26 for the retail sector.

·Profit expectations fell 29 points to a net 37% expecting lower profitability.

·Commercial construction intentions fell 43 points from +26 to -22; residential plummeted almost as much from +23 to -21.

·Export intentions fell another 24 points to -26, from what was already a record low. Export intentions were -23 in the early sample and -38 in the later sample.

·Expected availability of credit fell 5 points to a net 41% of firms expecting credit to be harder to get. This data also declined as the month went on.

·A net 39% of firms expect higher costs, down 14 points. Cost expectations dropped in every sector, most sharply for construction.

·Pricing intentions fell 12 points to a net 15% of firms expecting to raise prices. They plummeted 30 points for the retail sector, to +24.

·Inflation expectations fell 0.38%pts to 1.51%, slipping further away from the 2% inflation target midpoint.

"Times are grim," Zollner said.

"We’ve never seen such a broad economic shock strike with such ferocity. Firms are right to be alarmed. Both fiscal and policy are leaping into action but a severe recession is guaranteed.

"The days when we were wondering why firms were so unsure about the outlook feel very long ago. The problem is front and centre, and it’s a whopper.

"This will end. But with no one able to tell businesses when that will be, any attempts to shore up confidence are likely to get little traction in the near term. It’s going to get worse before it gets better, and firms know that."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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80 Comments

Happy days

We are on a steep slide that leads to a lava pit

Thanks for those deep insights ANZ.

We could have saved them the dollars they spent.

Can we cut the OCR, of course we can , we can use negative numbers
by Cowpat | 31st Mar 20, 1:13pm

ANZ business survey collapses, ANZ demands more graph paper to plot next month's reading . RBNZ needs to cut the OCR, be proactive , not kneejerk. Of course our OCR is in a much better position to do so.

The human race idefinitely needs to change its stance from arrogance to humility for everything otherwise be wiped out

Ridiculous, penalising savers for others' largess.

I think you're pushing on a string here. We only have 0.25 left to cut. No business is going to borrow in these uncertain times. The funds still have to be paid back.

"Commercial construction intentions fell 43 points from +26 to -22; residential plummeted almost as much from +23 to -21."

That's a hell of a lot of jobs.

Add on top all the lost tourism related jobs and retail we are going to see a Ue number we have never seen before.

And the real kicker ~ is anyone modeling the idea that mainland Chinese will have to repatriate money as their export driveb economy collapses ? Think 2012 to 2017 for the residential market but in reverse.

Note this happened to a lesser extent in Hong Kong during the GFC, lesser extent because the GFC didn't really have a huge impact on Chinese consumers or Chinese banks. This time both are front centre.

Given nobody can afford to buy a house right now and no new immigration, plus everybody working zoom - is that the end of the construction market for a while? i.e. no more supply

There is an underlying housing shortage in Auckland, the property promoters remind us ...

Yet rent has barely increased in the last 2 years... suspicious.

It is. Important to remember that retail is the sector to watch in terms of total employment (not even factoring in the supply chain).

Good point about the Chinese repatriation of capital. The same process has resulted in the big spike in the Euro, because they had to bring capital back to Europe to cover their losses everywhere.

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A rainy day has arrived and if businesses were doing any sort of risk management they'd have insurance, whether that be actual insurance or 3-6 months revenue tucked away, etc. That's budgeting 101.
The key is there's no structural issue behind this. It's not the equivalent of Britain joining the EU, the oil shocks where oil looked like it would be forever at a new level or any of the wars, etc.
We know from the Chinese experience that after a couple of months we'll start emerging. Some expenditures will be lost forever but much will have just been put on hold. We'll fight another day...

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Think again and be realistic ...in a couple of months we will be getting right into the winter flu season.

This thing is still out the back of the stadium warming up, the main event hasn’t even started.

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There is a Structure Issue behind 'this' actually. It's 'too many people clipping the same ticket'.
Many, many of them are going to find they have no job to return to. Think many in tourism for instance or 10 shops selling the same stuff etc etc etc and what are they going to do? Outbid other workers for their job, just t get some sort of income.

Don’t stress, the govt geniuses and the scholars at the RBNZ have been schooling up on MMT, so we’ll be fine.

"We know from the Chinese experience that after a couple of months we'll start emerging."

I'd take the idea of China emerging and getting back to work with a a few kg of salt. There is no global demand for products (except food and water) at the moment so the amount of people being laid off must be biblically large. If you've read the reports about the fall in the number of mobile users or the riots in Wuhan you'd probably revisit this statement.

Emerging yes but to a whole new world.

They are just going to let it run through China too. They'll just hide the truth about infections and deaths.

I don't know about up and running, but every single Chinese company that we have had any dealings with in the last year, mainly for electronic products, has in the last 5 days emailed us offering masks and gowns and gloves typically at 200% to 500% premium to the standard production prices, clearly more money to be made in these items than in any standard product range

If they're anything like the test kits they're sending to Europe, one in three will be up to spec.

This is going to break insurance.

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Don’t worry, remember Westpac sees only 7% drop in house prices.

There's more than just house prices to worry about. (also this article is not about house prices)

They forgot to put a 2 in front of the 7

CSB

So who's buying the NZX50??
Robots?
NZX50 is still up more than 300% since 2009. Is that a realistic representation of the business outlook as highlighted in this article?

As you know, robots are buying the markets. Algorithms ....They are buying economic programming and don't know 'the people' are sick and are about to become unemployed..

eg : "Air New Zealand this week begins the awful process of making staff redundant as the fundamental transformation that the airline industry faces means its business model may never look the same again."

But the BOTS did NOT buy air nz shares and were selling them instead. Huh? That's not what you told us

Don't forget the NZX50 is a gross index

Trader comment from TradingView back in Nov 2019:

I don't have access to the NZ stock market but looks like a massive bubble. Trying to guess the top here is a fun project.

Currently the market is smiling at us. - Double top with a lower high.

If the US stock market runs out of steam in the short term I believe that it could pop the NZ stock bubble.

Good post of a verifiable and insightful position before any of this fallout. The ensuing rout is on steroids and the rebound will be too

Sucker rally. Impacts of current slowdown still aren't known, when employment hits 10%+, then we will see how many people want to own NZ companies (like AirNZ Tourism Holdings etc). If you are buying in now, you are either very brave, in it for the long term, very silly or a combination of these.

Same thing happened 1929 DOW dropped then robounded and then kept dropping for a long time.
The graph from 1929 is tracking almost the same as DOW today.
It want just be straight down but it will be more down than up until it finds a bottom which judging by currents news will somewhere between 9000-14000 for the DOW is my pick.
But no one knows for sure but judging by economic data we just lost 10 years of growth in a week.

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Don't worry, REINZ will come up soon in a couple of weeks with some BOOM numbers ;)

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Is that the boom when the house collapses?

What yield can one expect on the million dollar homes in the Lakes district? Palmy surely still has heaps of upside potential?

I think some of those regional centers like Palmy might plummet. It was all about hot Auckland money, there were few strong fundamentals supporting some of the silly prices in the regions.

Not if the banks collapse.
Also working from home maybe the new norm. Office prices, property close to the city and the rest drop hard. Companies can not afford Alk prices and just leave to smaller cheaper areas where they can pay staff less due to lower living costs.

Could well be andreas, volumes will obviously be down for March but I don't think prices will… we shall see

The Australians are ahead of us by switching to online auctions which are still selling very well. Of 1200 planned onsite auctions 800 went online with good results

Does that mean that sellers have to increase their transparency / disclosure information for these auctions? Or do they just build more conditions into the sales?

No and no

We've already had it. Case, case, Cluster, Cluster, BOOM.....

Anyone else noticed that GDP live is still projecting increases? I guess not surprising that their approach doesn't know what to make of this, but still...

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Net migration has ground to a halt, export education in doldrums, international and domestic tourism has no pulse, hospitality is in lockdown, North Island farmers facing a drought, hundreds of developers and construction companies to collapse... basically everything that could go wrong pretty much has.

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And when it all settles down we'll realise how shallow our economy is, reliant on tourists and immigration fueled population growth to prop up gdp.

We've known that for a long time but somehow those in power expected third-world industries to keep our 'developed' economy afloat forever.

All we need now is some other natural disaster like an earth quake..

Shhh... Gaia has Ears....

Ah, the limitations of models!
Human judgement still pretty important!

I wonder what homes.co.nz will have to say in a few days. The market was strong and I guess nothing new much sold since. If it did the tiny number of sales might have a strong weighting on their algorithms. I understand they are based on sales so it could be all over the place or still looking like everything is going strong. I've a house for sale that went on the market maybe two weeks before the LD in the high end of a small NZ town.

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I guess quite a few people are about to find out the only thing you ever truly own is your reputation. Look after it.

There will be a few filing for moral bankruptcy in coming weeks

So, there will be a climb from the bottom. We will have to wait for that start of that.

Paymark is showing that spending decreased by 72% on the first day of lockdown, and is unchanged.
https://www.stuff.co.nz/business/120706792/massive-retail-drop-as-restri...

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Hearing stories of business in malls shutting down, as no foot traffic equals no revenue. Staff exited and likely liquidation to avoid the Mall owner chasing for rent. To boot you have a pile of apartments coming to market in Awk at the moment.

Then consider for a moment that the lock-down could extend for more time - 8 weeks 12 weeks.

There's no way we can go to 8 weeks. 6 at most.

All depends on how much the Labour voters stay at home.

If it’s 6 weeks, our economy is toast. The suicides alone over the next 6 months will outnumber the coronavirus deaths by a significant multiple. So much for the greater good. Sadly, I don’t think the situation would be different if National were in power...they’re all listening to the same intellectually bankrupt “experts”.

Agree, move level3 let industry go work then home, no social gathering, weddings, sport etc..just work home only, but just get productive sector going or be 500 thousand plus out of work. We need balance....

It's the time for the public health gurus to shine...

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I'm anxiously waiting on our parliamentarians (our rulers) and bureaucracy to join the rest of us in our pain and take a cut in their remuneration!

Great comment, only then will they understand

Some (all?) are probably working harder now than they have in a long time...

As a builder I'm working harder but producing less.
The compliance, health and safety is a shocker and always second guessing yourself.

30 percent paycut across all public organization would be good start, they destroying the private sector, I understand all government department full pay in level 4, private sector laying off thousands, cutting pay etc.... everyone needs scarfice jachinda

This, from a country, Australia, that was hoping to 'Balance the Budget" in 2021 after years of trying to recover from the GFC. "Missed by that much....." as Maxwell Smart might say!

Deficit to blow out to $290b; $500b in fresh debt.

Half a trillion dollars of new debt, if they're lucky.
https://outline.com/8Fx4Tc

Thanks.
"By the end of the year, the International Air Transport Association (IATA) expects “revenue passenger kilometers” (RPKS) — an airline industry metric that shows the number of kilometers traveled by paying passengers — to have slumped by ...an eye-watering 88% in the Asia Pacific region.

I'm more positive about this now. With expanded testing we should be able to remove blanket measures and move back towards business as usual.

"Test, test, test!" - Our PM reiterating the advice of the WHO. Testing is the primary measure by which progress to fight the virus should be judged at this early stage.

Yes Jacinda has just said, but not given a time-scale that some areas would get relaxed measures as the risk is assessed. Or words to that effect.

I'm not sure it's 'us' getting 'back to normal' that's the concern. It's 'them'....
You might be one of those Kiwis that wants to take advantage of the ultra-cheap cruise ship holidays that are about to emerge; buy that new TV that's about to become half the price of last months or take on some new really cheap debt to fulfill a desire. But if we aren't 'selling' our major products of inward-bound tourism and education, then I hope you aren't in one of those industries that provides the household income to do any of those.

The stock market is going up, we are saved.

ANZ have not yet shown, it's ultimate arse nal to the public.. not yet. Soon the main magician will be called: Mr. Sir JK - NZ? rest assured the blue team troop, with ANZ aided with co-sponsor of CCP shall save NZ inc. from this Covid-19 d***

Are house price still going to go up nope and long may it last my children have hope not be slaves for life.

Just went for a walk, beautiful. And for a change, people actually saying 'hi' to each other (from a distance).
Bit of humanity. A welcome change.

Indeed! Rather nice. I have been told it’s how NZ used to be!

better stock up on some extra toilet paper, Eh Gekko.

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