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New Zealand Economic Sentiment July 2022

New Zealand: Business confidence gains some ground in July

The ANZ bank business outlook indicator rose in July. As a consequence, a net 56.7% of firms reported that they expect general business conditions to worsen in the year ahead, improving from a net 62.6% of firms expecting bleaker general business conditions in the year ahead in June. As a result, the headline remained below the net-0% threshold that separates pessimism from optimism among businesses.

Business grew less downbeat with regards to profit expectations, investment intentions and commercial construction.

Meanwhile, firms’ outlooks regarding their own activity—a metric which has a stronger correlation to GDP growth—increased to a net minus 8.7% in July from a net minus 9.1% in June.

Commenting on the release, Sharon Zollner, chief economist at ANZ, stated:

“New Zealand businesses are well aware that the Reserve Bank is on a mission to reduce customer demand for their wares in order to reduce inflation. No wonder they’re feeling apprehensive.

While they wait for that hammer to fall, supply-side factors continue to cause headaches, including ever-higher costs, and, as we saw from the quarterly “biggest problems” question last month, a severe lack of labour. In theory, there will be a sweet spot at some point in the future where easing demand meets easier supply conditions. In practice, one suspects that that moment may prove fleeting.”

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