ANZ Business Outlook for May: 'While the outright disruption is easing, the recession is just getting started'

ANZ Business Outlook for May: 'While the outright disruption is easing, the recession is just getting started'

Business confidence has shown another small lift from abysmal levels in May's ANZ Business Outlook Survey.

ANZ NZ chief economist Sharon Zollner said the full-month survey showed small further rises in most indicators versus the preliminary results released on May 11.

This was happening as the country continued to make good progress on beating back Covid-19 and loosening restrictions on economic activity.

"However, the levels of the indicators remain pretty bleak. While the outright disruption is easing, the recession is just getting started," she said.

In the latest results 'headline' business confidence continued to lift over May, up a further 4 points to -42% from early in the month. A net 39% of firms expect weaker activity for their own business, still well below 2008/09 lows. The retail sector is the most pessimistic sector on this front.

“Although we are making progress opening the economy, Business Outlook activity indicators are improving painfully slowly. While the outright disruption is easing, the recession is just getting started. Expected profitability, investment and employment intentions, lifted but are all still deeply negative,” Zollner said.

“It’s not as gruesome as it was, but it’s hardly happy days out there. To put it in context, expected own activity would need to rise another 17 points just to reach its lows from the 2009 recession.”

Zollner said Covid-19 was on the brink of being eradicated in New Zealand - though constant vigilance will be required to keep it that way.

"We are, increasingly, free to get on with our lives.

"But those lives have abruptly changed for the worse, for many.

"Thousands of jobs have been lost; many more are tenuous.

"Firms’ balance sheets have taken an enormous hit from a prolonged period with zero revenue or close to it.

“Fiscal and monetary policy are doing what they can to cushion the blow and sow the seeds of recovery, but it’s going to be a long haul.”

Here's the key detail from the latest survey:

·          Employment intentions show a net 42% of firms intend to cut staff. (That number is made up of 51% of respondents saying they were going to reduce staff numbers, before subtracting the proportion who said they were going to raise staff numbers). The net percent of firms saying they now have fewer employees than a year ago held steady at a net 36%.

·          Investment intentions remain very low at -32%. Investment intentions overall lifted over the month: they were -38% in the early sample and -18% in the later sample.

·          Capacity utilisation, one of the best GDP indicators in the survey, lifted as activity restrictions eased, from -30% in the early-month sample to -18% in the later sample.

·          Profit expectations remain very low at -56% but again, they improved over the month (preliminary: -59%, late-month -46%). They remain weakest for agriculture (-71%) and least negative, though still grim, for construction at -42%.

·          Commercial construction intentions were pretty steady at -37% while residential was up a touch to a net 48% of firms expecting less work going forward.

·          Export intentions, at -32%, were similar to the preliminary read (-35%).

·          Activity versus a year ago continued to deteriorate over the month. A net 63% of firms report lower activity versus the same month a year ago. Agriculture is by far the least negative on this score (-11%).

·          Expected credit availability rose to a net 44% of firms expecting credit to be harder to get.

·          A net 28% of firms expect higher costs.

·          Also supporting the notion that the initial disinflationary pulse may be waning, pricing intentions lifted slightly over the month, with a net 2% of firms expecting to cut prices. They were strongest for retail where a net 21% intend to raise prices. Inflation expectations were steady at 1.3%.

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30 Comments

At the risk of repetition...
"The Reserve Bank of New Zealand released its bi-annual Financial Stability Report (FSR), which stated that the nation faces its sharpest economic contraction in 160 years."

There are some very very sobering statistics in that lot.

WP, incompetent team Labour and climate-change-above-all Greens are the biggest blocks for pro economic growth policies.

What would you suggest they do?

Their job?

And you have inside knowledge that they aren't?

We don't need any inside knowledge, the statistics and project failures are both public.

True, CHC post quake is still not back to normal,maybe the ex woodwork teacher Brownlee can have another crack at it if he gets in?

"51% of respondents saying they were going to reduce staff numbers"

Wow. I take what I thought was a pessimistic view of the economic fallout, but still, wow.

The Act Party is looking better every day.

Why Zack?

Because ACT is doing their job which is a democratic oppostion?

As opposed to any other opposition party?

I mean 15 bills passed in 17 hours must be a record right? Seymour has been very vocal of the rough shod legislation being pushed around.

Sounds like a government acting decisively in 'unprecedented' times :-)

Yes rushing bills at this rate is 'unprecedented'

The real world can be difficult to comprehend at times...when you are " oldintelligentandwealthy" you may see things are never black and white...or Blue & Red as it seems to be in Interest.Co... otherwise known as 'talkback for the intelligentsia'

By choosing a side you lose your ability to think independently and critically. You're influenced by the ideas and biases of those you associate, even more so when you 'align' yourself with a party. Your judgement becomes clouded and partisan in favour of your 'tribe'.
I'd rather be a free thinker than be a part of a political tribe.

Couldn't agree more,I have voted most ways over the years.I just enjoy taking a contrarian view when I see obvious 'tribal' comments.
Terms like COL etc,just show pure bias.

If it's worth doing, it's worth doing badly/quickly (being one and the same thing).

I'm confused,you say 'hurry up' and release the governments plan for jobs,you say Nats shouldn't have to rush out a costed plan for going forward?

Actually, what I have consistently said is fast legislation is almost always bad legislation.

If a law is worth making it is worth doing properly.

Is it?

Back when National was passing bills under urgency once every 15 sitting days in parliament (across their three terms), Grant Robertson was generous enough to acknowledge that the use of urgency was appropriate in times of emergency / crisis, such as after the Christchurch earthquakes - only questioning the abuse across other times in their terms.

Unless there was a time where 16 bills were passed in 17 hours that I'm unaware of, then yes it is.

That was the whole point of my comments. David Seymour is rightly questioning the govt as it could be argued abuse is happening currently.

As a former member of ACT and as a reformed libertarian: if I felt like purely voting for the freer market side of things, it would be for ACT and not at all for National. David Seymour is the best leader they've had in years, perhaps their best ever leader, and generally consistent is his message. Hell, If I lived in Epsom I'd probably vote for Seymour.

So if we have a pure free market,we would have left all the businesses to fend for themselves during this crisis.Remove all working for families,accommodation supplements etc

Yes

You can't say that in here...who is going to pay the rents to the investors if they have no jobs,no welfare?

I'm just saying "if I felt like" voting for ACT. But I don't. I think it was 2002 when I last voted for them. But I am saying I would vote for Seymour if I lived in Epsom. 2 reasons: supporting liberal social policies and having a consistent position.

I think it'd be worthwhile if they were consistently libertarian, if at the very least enough to apply it to Epsom. Rather than abandoning those values when it comes to seeking to exclude poor people from Epsom.