Businesses regain some confidence but report job losses still in the pipeline

Tuesday, 9 June 2020

Business confidence is improving but still extremely weak, says ANZ.

Business confidence was already edging up ahead of New Zealand's drop down to 'alert level 1' according to ANZ, but some economists are nervous that sharemarket investors may have got ahead of themselves.

ANZ said preliminary data from its monthly business confidence survey showed a net 29 per cent of business owners polled in early June were expecting a drop in their own business' fortunes in the year ahead.

That compares with a net 39 per cent in its May survey.

A net 37 per cent expected to cut jobs in the coming year, versus a net 42 per cent last month, and a net 39 per cent said they had already done that.

ANZ chief economist Sharon Zollner said the figures were an improvement but confidence was still 'extremely weak'.

* Standard & Poor's sees 'bridge to recovery' in New Zealand

The New Zealand dollar has made a big leap, which doesn't bode well for exporters.

'As New Zealand emerges into the light of level 1 from a lockdown that succeeded beyond any reasonable hope, disruption has waned, and normality beckons.

'This is fantastic news, but there’s a huge tourism-shaped hole in our economy,' she said.

The mood among local and overseas sharemarket investors has been far more buoyant, with the Nasdaq technology index reaching an all-time high on Tuesday morning New Zealand time, and the S&P500 index now up on its end-of-year close.

The NZX50 index came within just 20 points of also achieving the latter feat, reaching a morning high of 11590 before a lunchtime sell off.

'The stock markets don't think there is anything wrong with the economy,' Infometrics economist Brad Olsen said.

'It does concern me that markets are so seemingly-optimistic when the rest of the 'real economy' is going through quite a lot of groaning as it readjusts.'

Olsen said people might be expecting the economy to bounce back quicker than it would, given the current reliance of some businesses on wage subsidies.

'You have got to remember that at the moment we have still got more than 60 per cent of the labour force who are government supported.'

For many businesses wage subsidies would soon be coming to an end, he noted.

The appreciation of the New Zealand dollar – which was trading a full 10 cents above its March low at US65.7c at one point on Tuesday – 'wasn't wonderful news for exporters', he said.