Confidence on the rebound — ‘the vibe is changing’

Business confidence has rebounded in November and “it appears the vibe is changing”, says ANZ chief economist Sharon Zollner.

The latest ANZ Business Outlook Survey is much stronger across the board, offering further signs that the current economic slowdown may be reaching its trough.

Headline business confidence jumped 16 points to a net 26 per cent of respondents reporting that they expect general business conditions to deteriorate in the year ahead.

Firms’ expectations for their own activity over the year ahead — considered a better economic indicator than topline confidence — rose 17 points to +13.

“The improvement in the ANZ Business Outlook survey this month was broad and consistent,” Zollner says.

“The significant easing in both interest rates and the exchange rate is clearly working its way through the economy, and the remarkable resilience of New Zealand’s commodity prices is providing an invaluable buffer to the world’s woes.”

Business confidence has become a political football in the past year

The significant easing in both interest rates and the exchange rate is clearly working its way through the economy. Sharon Zollner, ANZ

with government supporters dismissing it as biased.

But it has successfully tracked the slowdown in GDP growth over the past two years and now seems to be capturing a change of sentiment.

“It is important to note that the activity indicators across the survey remain subdued,” Zollner says.

“Headwinds for businesses persist: credit availability, capacity constraints, elevated costs, uncertainty, vigorous competition, high household debt, and the . . . fact that our biggest trading partners appear to be in a spot of macroeconomic bother.

“But as we have long said, there is no reason for the New Zealand economy to go into recession as things stand.”

The agriculture sector is feeling far happier as a low Kiwi dollar and high export prices start to kick in.

Expectation around farms’ own activity leapt 31 points to +26, the highest level since September 2017 and the highest economy-wide.

“We continue to expect growth in the New Zealand economy to trough shortly and increase — albeit gradually — from here,” Zollner says.

The global economy absolutely could still throw a curve ball in our direction. “But it appears that the vibe is changing to ‘getting on with it’. Good stuff.”

The strong confidence figure saw ASB economists revise their interest rate outlook — picking the OCR will stay on hold in February, with one final cut in May.