Only way is down, ANZ

Declining business confidence and acute capacity constraints suggest the ‘‘only way is down’’ for economic momentum, ANZ economists say.

The New Zealand Institute of Economic Research reported yesterday that its Quarterly Survey of Business Opinion for the June quarter showed business confidence had slipped to its lowest level since Covid first arrived in the country in March 2020. Despite facing uncertainty over Covid and rising interest rates, cost pressures on businesses were intensifying, NZIER said.

ANZ economists Miles Workman and Finn Robinson said there was nothing in survey that would seem to stand in the way of the Reserve Bank raising the Official Cash Rate by 50 basis points both next week and in August, which would raise the rate from 2%, to 3%.

‘‘For broader economic momentum, it seems the only way from here is down.

‘‘That’s not to say the economic fundamentals have suddenly broken; rather, the economy is running out of resource to grow.’’

A net 1% of businesses reported a decline in their own trading activity in the quarter, on a seasonally adjusted basis, according to the NZIER survey.

A net 62% expected a deterioration in general economic conditions over the coming months, up from the net 34% feeling pessimistic in the previous quarter.

A reading of 0% would indicate that businesses were evenly split in their outlook.

NZIER principal economist Christina Leung said the survey results were broadly in line with business confidence surveys conducted by ANZ but that didn’t make them less worrying.

Despite the shakier outlook, inflation pressures had continued to intensify, NZIER found.

‘‘With these inflation pressures being so strong there doesn’t look to be anything in today’s release which should dissuade the Reserve Bank from it’s projected aggressive path of monetary policy tightening.’’

The services and building sectors were the most downbeat, with a net 70% of firms in the building sector expecting conditions to worsen.