Summarised by Centrist
New Zealand business confidence rose strongly in July, although renewed Middle East hostilities and higher oil prices weakened some indicators later in the month.
The ANZ Business Outlook survey showed headline confidence rising 19 points to a net 56 per cent. Firms’ expectations for their own activity increased 12 points to 49 per cent.
“The general theme of this month’s data is more optimism, with both business confidence and expected own activity at historically solid levels,” ANZ chief economist Sharon Zollner said.
Recent manufacturing activity remained the strongest of the sectors surveyed, although it dipped during the month. Agriculture recorded a marked fall after several years of outperformance, while construction improved and was “almost back in the black”.
Inflation expectations eased overall from 3.36 per cent to 3.14 per cent. However, the results varied sharply depending on when businesses responded.
Expectations stood at 3.07 per cent early in July but rose to 3.32 per cent later in the month. During that period, the Reserve Bank increased the official cash rate and oil prices climbed as the US-Iran war resumed.
Wage intentions were largely unchanged but remained slightly higher than the Reserve Bank’s forecasts. ANZ said margin pressures had eased.
Zollner said the economic outlook would depend on whether businesses proceeded with investment and hiring and whether households continued spending normally.
“Or will the uncertainty see many batten down the hatches and go into survival mode? Time will tell; the consequences could be long-lasting.”
