Business Survey Signals Soft Growth, Easing Inflation Expectations

ANZ business confidence and activity outlook can be added to the list of NZ indicators slowing and like consumer sentiment took a sharper step down after the Q4 data confirmed a “technical recession”. They fell to their lowest in six months in March but remain positive. Confidence fell almost 12 points to 22.9 and the outlook 7 points to 22.5. Activity is slowing as the RBNZ wants and while inflation is easing, some survey measures remain high suggesting that it is not contained yet.

• Business inflation expectations continued to ease falling 0.2pp in March to 3.5%, the lowest since October 2021 and moving in the right direction for the RBNZ. But pricing intentions, while they continue to ease gradually, remain too high at 45.1 as business costs rose in March to 74.6, also elevated. Wage expectations were higher at 80.5 from 78.9 driven by retail and construction. Cost pressures need to ease for inflation to return sustainably to target.
• Past wage increases were steady at 4.4% y/y and expectations for the coming year eased slightly to 3.3% from 3.4%.
• Inflation-related issues are becoming less of a problem for businesses but interest rates, competition and turnover are taking over.
• Reported past activity, which ANZ says has the closest correlation with GDP, declined 2 points to -7 in March but is consistent with ANZ’s +0.2% q/q forecast for Q1. It showed stronger retail, agriculture and construction but all other sectors fell.
• In line with the sharp drop in consumer confidence, labour demand fell in March to 3.5 from 6.2, while still positive was the lowest reading since September 2023.
• Exports, investment intentions, and profit expectations are all lower.

Source: MNI - Market News/Refinitiv