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ANZ's Business Outlook Survey for March finds falling business confidence and activity outlooks, while cost pressures are still seen as building

ANZ's Business Outlook Survey for March finds falling business confidence and activity outlooks, while cost pressures are still seen as building

ANZ's Business Outlook Survey for March has found that business confidence is falling, as is the outlook for future activity, while cost pressures are still building.

ANZ's chief economist Sharon Zollner said compared with February, headline business confidence fell 11 points to a net -4%, while firms’ own activity outlook fell 4 points to 17%.

“Business sentiment and activity indicators ticked down in March, consistent with our view that the economy would start to struggle a bit more as the lack of tourists reached its seasonal cash-flow peak impact and the unsustainable bounce in retail spending started to dissipate,” she said.

“The levels remain relatively robust but may have peaked for now."

“All forward-looking activity indicators were lower in the second half of the month. The preliminary results [released on March 9] would not have captured the full lockdown impact.”

Some of the detail from the survey:

  • Business confidence fell 11 points to net -4.1% (prelim: 0.0%).
  • Firms’ own activity outlook fell 4 points to 16.6% (prelim: 17.4%).
  • Investment intentions fell 4 points to 11.9% (prelim: 14.4%).
  • Employment intentions lifted 4 points to 14.4% (prelim: 16.0%).
  • Capacity utilisation was little changed at 14.6% (prelim: 16.6%).
  • Inflation pressure remains high. General inflation expectations rose to 1.97% (prelim: 1.95%).
  • Cost expectations rose 1 point to a net 73.3% of respondents reporting higher costs (prelim: 73.9%). And more than 80% of firms in the construction, manufacturing and agriculture sectors expect higher costs.
  • A net 47.3% of respondents intend to raise their prices, a historically very high level.
  • Firms are more-or-less equally divided on whether profits will rise or fall from here at 0.6% (prelim: +1%).
  • Export intentions were little changed at a net 4.5% (prelim: +6.0%).
  • A net 40.3% of firms expect credit to be harder to get (prelim: -39%).
  • Residential construction intentions fell 20 points, with a net 32% of firms expecting higher activity. Commercial construction intentions fell 5 points, with a net 22% of firms expecting higher activity.
  • When it comes to firms’ current level of activity compared to a year earlier, construction remains the outlier, with other sectors back to par. However, there were signs of moderation in the construction sector, with decent falls across a range of activity indicators (particularly employment), while cost pressures continue to build.

Zollner said freight disruptions "remain problematic".

"Inward freight disruptions are most problematic for manufacturing and retail, though the latter improved slightly. Outward freight disruptions are generally less of a problem, but are worst for agriculture (and worsened considerably over the month) and manufacturing."

In March, firms reported that finding skilled labour remains their largest problem (and it’s getting worse) followed by regulation/paperwork and competition (though this improved). Low turnover is in fourth place, though a decent step back, Zollner said.

“We also ask firms every three months about what’s driving their investment decisions. Unsurprisingly the domestic economy remains a clear #1, but in terms of changes compared to three months ago, spare capacity and labour costs are becoming more important, while credit availability is slightly less of a driver.

“The March snap lockdowns make Business Outlook data a little harder to interpret. However, it is consistent with our view that as the demand overshoot wanes and the tourists are missed more and more, the economy will go largely sideways this year.

“The quicker cooling we now expect in the housing market plays into this theme as well. The vaccine rollout and the subsequent border re-opening will be game-changers, though it won’t be click-of-a-switch stuff.

“But there’s a path to the new normal, whatever precisely that looks like, and we’re on it. We’ll be keeping an eye on construction for possible bumps in the road," Zollner said.

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17 Comments

Don't know about NZ businesses but tech gurus elsewhere seem to have a lot of confidence in our country:

New Zealand should become the world’s next Silicon Valley, attracting the best and brightest to transform our economy out of the industrial age, according to Nasa chief scientist Dennis Bushnell.
New Zealand was a “superb” place to live, Bushnell said, noting his friends all over the world wanted to move here.
New Zealand should import these superb, inventive, talented people and export ideas and innovations, he said.

https://www.stuff.co.nz/business/124699041/nasa-chief-scientist-says-nz-...

Propaganda. Yes, NZ is a good place to live. Doesn't mean it's the next Silicon Valley. I have an ownership share in a tech business with people from Argentina to Poland. We integrate with different partners globally. The only business capable of integrating from NZ has bern too slow to react. Their people are good but no better than others globally.

11
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True. Tech billionaires undoubtedly want to "live" here and by live I mean build their holiday homes and doomsday bunkers.

Such pieces fool nobody in expecting sought-after investors will supposedly bring 90-100% of the capital, know-how and global talent into NZ just because the country is livable.

Do they want to move to New Zealand because of what it is today?
Or do they want to move to the New Zealand that they want it to become?

London is cheaper to live in Auckland. That's why it's never going to happen.

Butt but.. team of 3.5mil? be kind? stating security response=border closure=health response? Not just UK in general, OZ(outside Syd & MelB), Canada & US too. The artificially wealth generated from top, is expected to be flow into business & more work below it. The debt cost? to be paid by future tax payers, the grand plan is to get more migrated into NZ with ease of acceptance, providing the easy money from overseas willing to be parked for period of time in NZ.

More signs of Stagflation...

Looks like the housing market is the moon and national economy is the tide.

How coincidental that that business confidence drops exactly 4% when one roof reported LVR dampened house prices by 4%.

Well done Labour, more to come!

You think the distorted-horribly-by-ultralow-interest-rates housing market should be the be-all and end-all of our economy? Why?
You are happy for a bubble to keep inflating and think that we should all kid ourselves that that is sustainable.....it's a pretty bankrupt philosophy.
You do realise that bubbles eventually pop aye?

It makes more sense if you view these troll posts as a form of mental illness.

Haven't bought your plane ticket yet? Need help just ask. We can crowd fund you; one way only, quarantine not included.

You want to clown fund a plane ticket? That's great.

Given that banks have just one function in our society - to lend money for the purchase residential housing in the current bubble - I wonder why they conduct these surveys. Maybe it's a public relations exercise.

Just trying to keep an illusion going I guess. Reality is banks basically won't even look at lending to small/medium sized NZ businesses. You are better off borrowing money against your home/investment property & lending it too your business personally.

On-lending the money to your business will be the only way to claim the interest as an expense. It does make things a bit of a farce. Problem with this is that if the business gets into trouble, there goes the business owners house too.....

Risk-taking is exactly what the central banks and governments want to see. But the speed with which markets have flicked the switch from fear to greed is what’s most fascinating. Technically .... we did have a bear market and a recession last year.

Many of the blow-ups we’ve seen in the first three months of the year – GameStop, Greensill Capital and in the last week the incredible demise of Bill Hwang’s Archegos Capital – feel very much like the kind of incidents that occur late in a bull market.

Wall Street might not be at the start of a new bull market but in the same one that started in 2009 after the GFC, if you see last year’s market crash as a dramatic interruption, but a brief one. If you take this view, we’re very late in the cycle – which is when dramas get crazier.

https://www.afr.com/chanticleer/fear-fades-greed-rules-lessons-from-a-dr...

Govt & RBNZ will ensure, they'll do what ever necessary to curb the inflation.. to the point of unlimited supply number of $ can be provided. Like PDK said, there's a limit of everything on this planet, but he forgot to mention that anything related to human imagination is actually unlimited, what is the limit of infinite numbers?