New Zealand firms went into the last week of August still expecting things to get better, just slightly less emphatically than they did in July.
ANZ’s Business Outlook survey for August, released on Monday afternoon, put business confidence at 53.7, down from 56.1 in July. The measure of what firms expect for their own activity over the coming year eased to 48.2 from 49.3. ANZ Research described both as being “at very high levels”. Anything above zero means more firms expect improvement than decline.
The more interesting number sat further down the table. Firms are also asked how their activity now compares with the same month a year ago, and that net balance jumped to 16.4 from 9.7. It is the survey’s backward-looking question, the one that measures what has actually happened rather than what businesses hope will happen, and it has been the weakest part of the survey right through the downturn. The large services sector drove the lift, moving from 10 to 19.
“The August Business Outlook survey paints a picture of firms who are keen to get on with things despite a volatile global economic backdrop,” ANZ Research wrote. “Cost and pricing intentions remain elevated, but there is widespread optimism that the worst is past and that the economy is getting back on track. Risks are easy to point out, certainly, but we share that optimism. The lift in past activity suggests the bounce-back is already underway.” The report lists ANZ chief economist Sharon Zollner as the contact.
The bank was careful not to oversell it. Reading across its own heatmap of indicators, ANZ said the results were best interpreted as “expectations of ongoing economic growth remaining widespread, rather than expectations of the economy taking off”. It made a similar point about retail, which recorded the strongest confidence of any sector at 65.3, calling that “probably a starting point story rather than great expectations”.
That gap between sentiment and the ground underneath it shows up most clearly in the staffing numbers. Firms said they intended to hire, with employment intentions rising to 19.3 from 18.1, the highest reading since February and led by services on 24.9. But asked whether they actually employ more people than they did a year ago, the net balance was minus 2.2, worse than July’s minus 0.3. Construction was at minus 18.4 and retail at minus 15.2. Businesses are planning to take people on. They have not done it yet.
That fits the official data. Stats NZ reported earlier this month that the unemployment rate reached 5.6 percent in the June quarter, the highest since September 2015, with the underutilisation rate at 13.8 percent. Confidence surveys turn well before payrolls do, and the distance between the two is currently wide.
The inflation side of the survey was mixed, which matters a great deal with a Reserve Bank decision two days away. Pricing intentions recovered last month’s fall to sit at 51.0, with manufacturing at 60.4. Cost expectations rose to 80.8, and in agriculture reached 96.2, meaning almost every farming business surveyed expects its costs to go up. Inflation expectations one year out lifted to 3.26 percent from 3.14 percent, and every sector moved higher.
Against that, the size of the increases firms expect is shrinking. Cost expectations three months out fell to 2.53 percent from 2.70 percent. So more firms expect costs to rise, but by less. Wage expectations for the next 12 months crept up to 2.62 percent, the highest since March.
ANZ flagged that last figure as one to watch, and offered an unusual explanation for why it bounces around so much. The net proportion of firms planning wage increases “has moved consistently in the opposite direction to oil prices in recent months”, the report said. “That is, when fuel costs rise, firms think they can’t afford to give wage increases, and vice versa.” The bank also noted “a growing pile of data that suggests there might be a meaningful mismatch between the skills firms are looking for and what they are currently finding in the labour market”, which it described as inflationary for any given rate of growth.
Export intentions were the standout improver, rising to 31.4 from 26.6, with manufacturing at 44.4 ahead of agriculture on 36.8. Farming was otherwise the gloomiest part of the survey. Agricultural profit expectations sat at minus 23.1 while retail was at plus 47.8, and agriculture was the only sector reporting credit getting harder to obtain, at minus 19.2.
Construction told the least encouraging story. Residential construction intentions dropped to 15.5 from 27.0 and commercial fell to 24.6 from 29.3, although both remain above average. ANZ changed how it builds those two series this month, using answers from every firm that responds to the question rather than only firms in the construction sector, on the basis that the broader measure is less volatile and better at predicting consents and activity. The revision runs back to September 1999.
The timing was pointed. The same morning, interest.co.nz reported that new home completions in Auckland have fallen to a near four year low, with 13,540 code compliance certificates issued for new dwellings in the year to June, down 12.3 percent on the previous year and 30.8 percent below the peak of 19,560 in the year to May 2024. Code compliance certificates are issued when a building is finished, so they measure actual supply rather than the intentions captured by consents. Rising consent numbers over the past two years should feed through to completions eventually, given the usual lag of about two years between the two, but the houses being finished today were decided on in a much worse market. Our interactive house price tool tracks what has happened to prices and affordability across 18 New Zealand cities since 2001.
By region, ANZ noted Auckland’s own activity expectations are now outpacing the South Island, a reversal of the pattern that held through much of the past two years.
The survey lands two days before the Reserve Bank reviews the official cash rate on Wednesday. Economists at all five major banks expect a rise to 2.75 percent, with annual inflation running at 4.1 percent. A survey showing firms expecting to lift prices, expecting costs to rise and nudging up their wage plans will not argue against that, even if the same survey has them feeling better about the year ahead than they have in some time.
ANZ’s next Business Outlook is due on 30 September. RNZ also reported the results on Monday afternoon.
Are you seeing the pick-up in your own business or workplace, or does it still feel like the downturn where you are? Tell us in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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