Coronavirus has dealt a blow to business confidence, ANZ survey

Thursday, 27 February 2020

More than half of retailers expect to raise prices.

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

Headline business confidence fell 6 points to -19 in February, with 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.

ANZ chief economist Sharon Zollner says coronavirus has caused widespread alarm among businesses expectations.

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Confidence was a net negative 14 per cent among the first group, but dropped sharply to -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 headlines were generally more negative,' ANZ chief economist, Sharon Zollner said.

Farmers have reported a sharp drop in business confidence as coronavirus affects exports.

'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 read since mid-2008. 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 own activity expectations collapsed from positive 16 to -30. Similarly, manufacturing fell sharply, from +24 to +4.

The construction sector's own activity expectations more than doubled from 10 per cent to 22 per cent of firms expecting busier times ahead.

Employment and investment intentions also suffered in February.

Overall investment intentions fell 2 points to +7 per cent In the hard hit agricultural sector investment intentions took a dive to -30 and employment intentions fell to -16 points.

Overall employment intentions dropped by 6 points down to 2 per cent of firms planning on hiring.

The domestically focused construction sector appeared to be immune from the outbreak headlines, Zollner said. Construction employment intentions were back in the black for the first time since early 2019 at +3.

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

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

Credit availability expectations were 'deeply negative' at just 36 per cent, Zollner said.