Business confidence decreases prior to Budget announcement

Business sentiment in New Zealand has taken a hit as firms express less optimism about their future outlook, according to the latest ANZ business outlook survey. The survey, conducted on the eve of the Budget, revealed that confidence levels fell for the fourth consecutive month, with headline confidence dropping 4 points to a net 11 percent.

Despite the overall decline in sentiment, there was a positive note in the form of easing inflation expectations. Pricing intentions fell and inflation expectations dropped from 3.8 percent to 3.6 percent, aligning more closely with consumers’ expectations.

ANZ chief economist Sharon Zollner noted that while the manufacturing sector showed surprising positivity in the survey, the services sector was feeling the chill. The Institute of Economic Research’s quarterly survey of business opinion in April also highlighted the souring national business sentiment.

Zollner acknowledged that the survey results painted a grim picture, but also pointed out that inflation pressures were easing. This could eventually lead to a restoration of confidence and a potential decrease in interest rates.

Despite the challenges faced by many firms, the drop in pricing intentions was seen as a positive development by the Reserve Bank. Zollner emphasized the importance of continued progress in reducing non-tradable inflation to support economic recovery.

Overall, the survey indicated ongoing struggles for businesses, with reported past activity remaining weak. However, the potential for improved inflation dynamics offers a glimmer of hope for the future economic outlook.