sign uplog in
Want to go ad-free? Find out how, here.

ANZ Business Outlook preliminary survey results for October show another widespread improvement in forward looking activity indicators - some measures stronger than a year ago

ANZ Business Outlook preliminary survey results for October show another widespread improvement in forward looking activity indicators - some measures stronger than a year ago

The last major business confidence survey before the election shows another widespread improvement in businesses' expectations of trading conditions - albeit that this is still rising from very low levels.

ANZ on Thursday released preliminary results from their October Business Outlook Survey.

Many measures were still in the negatives - but some have actually turned positive, including the key "own activity" measure, which has improved to a net +4% from -5% in September. (The net totals are worked out by subtracting the numbers expecting a deterioration from those expecting improvement).

The levels of confidence now being seen could not have been envisaged when the confidence of Kiwi businesses was absolutely smashed by the March/April lockdown.

The Reserve Bank has been showering stimulus into the economy, with its money printing programme (termed the Large Scale Asset Purchase programme, LSAP) currently targeting $100 billion of effectively printed money.

On top of this the RBNZ has been consistently signalling that it might take the benchmark interest rate, the Official Cash Rate into minus territory early next year. (the OCR is currently on 0.25%) And as well, the central bank is soon to introduce a Funding for Lending Programme (FLP) whereby it will directly lend money to banks at an interest rate around the level of the OCR.

ASB senior economist Jane Turner, in reacting to news of Thursday's ANZ Business Outlook results, said if the strengthening in business confidence continues at its current pace, the case for further policy stimulus "will be much reduced".

"We can envisage a scenario where the OCR does not fall below zero in 2021."

ANZ chief economist Sharon Zollner said key tests for the economy lie ahead including the winding down of the wage subsidy and what will be "the lost summer" for tourism.

"But we’re facing into those challenges in much better heart than looked likely a few months ago."

Westpac senior economist Satish Ranchhod said while the confidence and activity gauges in the report are not at historically strong levels, and businesses are continuing to wrestle with a number of challenges, "nevertheless, today’s report adds to the picture of an economy that is recovering from the outbreak much faster than had been expected".

"...Today’s report, along with comments we’ve been hearing from businesses, reinforces the picture of an economy that is on the mend and has a good deal of momentum."

Zollner noted that both the headline business confidence measure and own activity lifted (by 14 and 9 points respectively).

The main business confidence reading was still at a net -14.5%, but this was up from -28.5% as of at the end of September.

“For own activity, a read of +4% still doesn’t count as ‘strong’, but it’s a remarkable turnaround from -55% in April, and higher than a year ago!”

“Investment intentions were little changed and remain subdued. But employment intentions lifted again. In light of the wage subsidies rolling off, this is very encouraging.

“Profitability expectations were up another 9 points, with expected costs 7 points higher, but pricing intentions up by slightly more, and expected ‘busy-ness” (capacity utilisation) very slightly higher.

“The backward-looking indicators are still showing the impact of the renewed Alert Level restrictions. Compared to the same month a year ago, a net 9% of businesses reported lower activity, but this is up 10, and a net 17% reported lower staff numbers than a year ago, an improvement of 4 points.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

4 Comments

Sixty-six per cent of the executives said they would feel confident investing in New Zealand, putting it in first place out of 15 investment destinations, most of which scored below 40 per cent.

The businesses surveyed feel less impressed about Australia's (and by extension, The National party's) approach of "stimulus".

What they don't realise is that you can't expect businesses to take a long-term approach by investing in an economy when those running the scene are themselves resorting to quick fixes.

https://www.stuff.co.nz/business/123019858/bloomberg-business-survey-put...

On top of this the RBNZ has been consistently signalling that it might take the benchmark interest rate, the Official Cash Rate into minus territory early next year. (the OCR is currently on 0.25%) And as well, the central bank is soon to introduce a Funding for Lending Programme (FLP) whereby it will directly lend money to banks at an interest rate around the level of the OCR.

Hardly a signal confirming a busy profitable economy exhibiting investment in productive endeavours to meet exuberant consumer demand.

Briscoes & The Warehouse, just announced a profit year! - This is an indication that govt. wage subsidy works perfectly - what we now hope is that the next winning govt./Hopefully still Lab - is willing to re-phrase the wage subsidy into more intellectual way, say 'income assurances scheme', and the cap minimum limit? need to be extended to around $980/week for full time staffing - this will ensure the continuity of FIRE economic flame. Please, govt & RBNZ - do ignore those that want to dowse the flame - You're on the right path, just need to do it more & quick! before Q1 2021

Pusheen.. bring on more corporate welfare for businesses owned by the very richest among us? Yeah, nah.