The gloom over the corporate sector has eased somewhat, but high inflation and labor shortages will lead to further interest rate tightening from the central bank.
ANZ Bank’s monthly business confidence survey showed that 48% of respondents expect the economy as a whole to deteriorate this year, down from 57% pessimism in July.
Opinions of the most followed companies on their own outlook also improved, with a net 5% expecting to be worse off than the previous month’s 9%.
ANZ chief economist Sharon Zollner said sentiment had improved slightly for a second month, but the underlying causes of the gloom were still there.
“Inflationary pressures remain intense. Inflation expectations remained virtually unchanged at their highs, and the net proportion of businesses expecting higher costs remained stable.”
Companies’ hiring intentions improved and their export expectations turned positive, they were still optimistic about profits, investment and little changed about the additional effects of inflation on their businesses. costs and the likelihood that they will have to raise their prices accordingly.
Construction remained the most depressed sector, although their expected costs fell sharply, and there was an improvement in sentiment in the manufacturing, retail and service sectors.
“While the slightly rebounding activity indicators are apparently good news, today’s survey was not particularly encouraging for the RBNZ. [Reserve Bank of New Zealand]”, Zollner said.
She said the rate hikes were hurting the housing market and the construction sector, but overall indicators of inflation among businesses were “far too high”.
Respondents reported a 6.7% wage increase over the past year as they expected a 5.3% rise next year, which would be a key factor the strength of domestic inflationary pressures and the response of the RBNZ.
“The risks are tilted that the RBNZ will have to continue with the OCR [official cash rate] hikes next year to cool the economy enough to feel comfortable getting the inflation problem under control.”