NZ: Robust business outlook - ANZ

Cameron Bagrie, Chief Economist at ANZ, notes that the NZ business confidence and firms’ own activity expectations were broadly unchanged in August, but stronger after adjusting for seasonality and together with firms’ elevated employment and investment intentions, the survey points to good times continuing for the economy but pricing and inflation gauges remain soft.

Key Quotes

“The weather may be cooler, but firms still appear happy to be outside and enjoying running around in the fresh air. The net number of businesses optimistic towards prospects over the coming year was unchanged in August at 16%. Service sector firms are the most optimistic, and while the agriculture sector remains at the other end of the spectrum, it recorded the largest jump in confidence in the month.

The story is very robust when you dig a little deeper. After adjusting for seasonality, business confidence hit a 20-month high in August. Moreover, the net number of firms that are optimistic towards their own businesses jump-roped 2 points higher to a net 34%. In seasonally adjusted terms, own activity expectations rose to a 21-month high. It was a similar story of positivity across other elements:

• Investment intentions rose to +22, the highest since March 2015. It’s not the weather to be slip and sliding, and neither is this indicator.
• Employment intentions lifted 2 points to +19, with the construction sector tossing the desire-to-hire ball to the services sector.
• A net 22% of businesses expect a lift in profitability, down 1 point.
• Export intentions rebounded from +16 to +20; not high but not out for the count either.
• Both residential and commercial building intentions eased back (to +36 and +24 respectively) but remain at decent levels.
• Firms’ pricing intentions eased 3 points to a net +15% (a four-year low). When it comes to inflation in the economy, it remains a game of hide and seek!”