New Zealand: Business confidence sours in August
August 10, 2020
The ANZ bank business outlook indicator deteriorated heavily in August, according to a preliminary reading. As a consequence, a net 42.4% of firms reported that they expect general business conditions to worsen in the year ahead, down from a net 31.8% in July. Thus, the headline reading remained deeply entrenched below the net-0% threshold that separates pessimism from optimism among businesses.
August’s result reflected a pullback in sentiment across most components. Export, employment and investment intentions as well as profit expectations were more pessimistic than in July. That said, capacity utilization improved from the prior month.
Meanwhile, firms’ outlooks regarding their own activity—a metric which has a stronger correlation to GDP growth—plunged to a net minus 17.0% in August, from July’s net minus 8.9%.
Commenting on the release, Sharon Zollner, ANZ chief economist, stated:
“There are three prongs to this economic crisis: lockdown, closed borders, and an incredibly synchronised global slowdown that will hit exports. So far, we’ve navigated the first and managed to eliminate the virus in the process (go team!). But we’re still a long way from the finish line. And with temporary fiscal support measures poised to roll off in coming months, and the impacts of a closed border to be fully felt only when the peak-tourism summer season arrives, there are plenty of economic hurdles to clear yet”.
Author: Javier Colato, Economist