New Zealand Economic Sentiment April 2021

New Zealand

New Zealand: Business confidence weakens further in April

April 13, 2021

The ANZ bank business outlook indicator continued to fall in April. As a consequence, a net 8.4% of firms reported that they expect general business conditions to deteriorate in the year ahead, from a net 4.1% of firms reporting that they expected general business conditions to worsen in the year ahead in March. Therefore, the headline reading moved further below the net-0% threshold that separates pessimism from optimism among businesses.

April’s result mainly reflected weaker profit expectations and capacity utilization as well as expectations of less favorable credit conditions ahead.

Meanwhile, firms’ outlooks regarding their own activity—a metric which has a stronger correlation to GDP growth—dipped to a net 16.4% in April from a net 16.6% in March.

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

“The stresses and strains in the New Zealand economy are starting to show. Although reported own-activity expectations are off their highs, cost pressures are intense, and subdued profitability expectations suggest firms are not optimistic about their ability to recoup all of it. […] Shipping disruptions, rising global commodity prices, the higher minimum wage, and skill shortages are creating something of a perfect storm. It’s inflationary, but not growth-friendly, so the RBNZ will look through it as long as it appears transitory”

FocusEconomics Consensus Forecast panelists project fixed investment to increase 6.5% in 2021, which is up 0.2 percentage points from last month’s forecast, and to increase 4.5% in 2022.

Author: Massimo Bassetti, Senior Economist

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