Covid-19 blow to business confidence

The coronavirus outbreak has hit business confidence hard in the past month, the latest ANZ Business Outlook survey shows.

Headline business confidence fell 6 points to minus 19 this month, with a net 12 per cent of firms expecting stronger activity for their own business, down 5 points.

But confidence dropped markedly after the news of the Covid-19 coronavirus on February 17.

Roughly two-thirds of the monthly responses were received at the beginning of the month with the remainder coming in after February 17. Confidence was a net negative 14 per cent among the first group but dropped sharply to minus 33 per cent after the coronavirus outbreak in China.

Similarly, 18 per cent of businesses that responded earlier in the month expected stronger activity ahead for their own firm but only 4 per cent of the later respondents. ‘‘Survey responses received after the Covid-19 outbreak hit the headlineswere generally more negative,’’ ANZ chief economist Sharon Zollner said.

‘‘The Covid-19 outbreak in China appears to be causing widespread alarm about the outlook for both the New Zealand economy and firms’ specific prospects.’’

Pricing intentions soared for retailers with 54 per cent (up 24 points) of respondents expecting to raise prices, the highest since mid2008. The average was unchanged at a net 27 per cent of firms planning to raise prices.

There was a sharp decline in both activity and sentiment for agriculture and manufacturing.

This was partly offset by a rise in indicators for construction, which appeared to be immune from the outbreak headlines, ‘‘for now’’, Zollner said.

The agriculture sector’s activity expectations collapsed from positive 16 to minus 30.

Similarly, manufacturing fell sharply, from +24 to +4.

The construction sector’s activity expectations went from 10 per cent to 22 per cent of firms expecting busier times ahead.

Employment and investment intentions also suffered this month. Overall investment intentions fell 2 points to +7 per cent. In the hard-hit agricultural sector, investment intentions took a dive to minus 30 and employment intentions fell to minus 16 points.

Overall employment intentions dropped by 6 points down to 2 per cent of firms planning on hiring. Construction employment intentions were back in the black for the first time since early 2019 at plus 3.

Capacity utilisation, considered a good indicator for gross domestic product, also fell from +15 per cent to +10 per cent.

Firms were expecting lower profitability, with a net 8 per cent expecting it to drop.

Credit availability expectations were ‘‘deeply negative’’ at 36 per cent, Zollner said.