Bounce in business confidence has 'run out of steam', ANZ warns

Thursday, 30 July 2020

ANZ says the improvement evident in the preliminary data it collected for its July business confidence survey hasn’t carried through to further improvement in responses later in the month.

The recovery in New Zealand business confidence appears to have run out of steam, ANZ has reported.

The bank has now collected all the data for its survey of business confidence in July.

Chief economist Sharon Zollner said that showed the “vigorous bounce out of lockdown appears to be topping out”.

Most indicators of confidence had slipped back slightly from the preliminary data ANZ reported earlier in the month, she said.

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“Headline business confidence” was at a net negative 32 per cent – slightly lower than the preliminary read of a negative 30 per cent, but better than June’s negative 34 per cent reading.

A net 9 per cent of firms expected weaker activity for their own business.

That was still well up on June’s figure of 26 per cent, but the improvement had “stalled since the preliminary July read when only a net of 7 per cent were expecting weaker activity”, she said.

“Bounces are fun, but this one has probably nearly run its course,” Zollner said.

“The economic pain arising from the closed border and sharply weaker global growth is yet to be fully felt.”

Unfortunately, that blow was inevitable, she said.

“That the border will remain closed for the rest of the year is one of the few certainties in our economic forecasts at the moment and that fact, in and of itself, means a big hole in economic activity, centred on tourism and the foreign education sector.

“Still, looking at what’s happening abroad, we can count our lucky stars,” she said.

ANZ released its survey as former prime minister Sir Bill English advised businesses to hoard some cash and prepare for a ‘W’-shaped downturn.

English likened the economic impact of Covid to an earthquake, after which the cracks might only become apparent over time, cautioning businesses that conditions could get “really tough”.