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New Zealand Economic Sentiment May 2022

New Zealand: Business confidence plunges deeper into pessimistic terrain in May

The ANZ bank business outlook indicator dipped in May. As a consequence, a net 55.6% of firms reported that they expect general business conditions to worsen in the year ahead, deteriorating markedly from a net 42.0% of firms expecting bleaker general business conditions in the year ahead in April. As a result, the headline moved further below the net-0% threshold that separates pessimism from optimism among businesses.

Business grew more downbeat with regards to export intentions, profit expectations ease of credit and residential construction. Moreover, their inflation expectations rose.

Meanwhile, firms’ outlooks regarding their own activity—a metric which has a stronger correlation to GDP growth—plummeted to a net minus 4.7% in May from a net 8.0% in April.

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

“The RBNZ has a very big job to do tackling inflation, and it seems likely that the OCR needs to go much higher yet. However, they are getting traction, and we expect rate hikes will revert to a more standard 25bp pace from August onwards as the balancing act between medium-term inflation risks and near-term growth risks becomes more nuanced than it is currently.”

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