Business confidence in economy slips, but employment intentions remain strong

Wednesday, 27 October 2021

Confidence in Auckland is holding up “surprisingly well”, the country’s biggest bank says.

Businesses’ confidence in the economic outlook slipped in October amid uncertainty over the Covid outbreak, ANZ has reported.

But chief economist Sharon Zollner said businesses’ assessment of their own prospects had improved since September and medium-term indicators of economic confidence remained “broadly robust”.

A net 13 per cent of business owners were gloomy about the economic outlook, compared to a net 7 per cent in September.

But firms’ assessment of their own fortunes edged up 4 points, with a net 22 per cent upbeat on that measure.

Jill Allan, owner of Fairlie's Paca Shack, talks about the heartache of having to sell her alpaca herd and property in the wake of the collapse of tourism in the Mackenzie district of South Canterbury. (First published October 2021)

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Inflation expectations jumped among the later respondents to the survey, after Stats NZ reported a surge in inflation to 4.9 per cent in the September quarter, and Zollner said the survey showed the cost-pressures on businesses were “unrelenting”.

“In every sector except services, more than a net 90 per cent of firms report higher costs.”

Employment intentions remained strong.

In every industry other than agriculture, businesses expected on aggregate to take on rather than reduce staff, the survey indicated.

ANZ concluded that, overall, confidence was “still fairly robust”, but with cracks appearing.

Zollner described the resilience of Auckland businesses as impressive and said firms there were holding up surprising well, but she said ANZ’s survey would not capture the “cumulative damage” done to firms’ balance sheets.

“Despite living week to week to some extent, firms appear to be getting on with it as best they can.”