Business sentiment falls ahead of Budget

Business sentiment soured again on the eve of the Budget, with confidence levels falling for the fourth straight month, as firms feel less upbeat about their outlook.

ANZ’s business outlook survey showed headline confidence fell 4 points in May to a net 11 percent, while firms’ own activity outlook fell 2 points.

However, there was a positive inflation reading, as pricing intentions fell and inflation expectations eased from 3.8 percent to 3.6 percent – similar to consumers’ expectations.

The souring national business sentiment was similarly highlighted by the Institute of Economic Research’s quarterly survey of business opinion in April.

A recent regional survey by Business Canterbury showed firms were less positive about their future financial performance.

ANZ chief economist Sharon Zollner said the manufacturing sector – which had been experiencing a prolonged downturn – was “surprisingly” upbeat in its survey, but the services sector was feeling the chill.

The survey made for “grim reading” but also confirmed inflation pressures were waning, Zollner said.

“More meaningful progress on getting non-tradable [domestic driven] inflation down is in the pipeline, which, barring any nasty inflationary surprises, should in time, restore the quiet confidence the Reserve Bank was previously exuding that they’ve got this, allowing rates to fall,” she said.

“But for now, many firms are struggling to see the light at the end of the tunnel.”

The drop in pricing intentions would be welcomed by the Reserve Bank, Zollner said.

“There’s still a long way to go, but any step in the right direction is welcome. The proportion of firms expecting higher costs remains stubbornly high.”

Reported past activity – an indicator of economic output – remained weak, according to the survey.

According to the news on Radio New Zealand

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