Past activity jumps to its strongest reading since April despite fresh Middle East disruption
New Zealand business confidence held largely steady in August, according to the ANZ Business Outlook, even as renewed hostilities in the Middle East pushed oil prices higher again.
Business confidence eased two points to 54, while expected own activity dipped one point to 48 — both still described as sitting at very high levels. Reported past activity told the more encouraging story, rising a further six points to 16, led by the services sector.
Westpac senior economist Michael Gordon (pictured) said firms appeared largely unfazed by the renewed conflict.
"Firms appear to have weathered the disruptions stemming from the Iran conflict reasonably well, though not wholly unscathed," Gordon wrote in a Westpac commentary.
The picture across sectors was mixed. Retail posted the strongest confidence reading at 69, though ANZ Research noted the result was "probably a starting point story rather than great expectations." Agriculture was the only sector reporting negative ease-of-credit conditions, at -19, while employment intentions climbed to their highest level since February, led again by services.
Inflation expectations tick back up
Business inflation expectations lifted from 3.14% to 3.26% in August, with more firms expecting to raise their own prices — though the size of expected cost increases continued to shrink, easing to 2.53% from 2.70%.
Wage expectations also crept higher, to 2.62%, their strongest reading since March. Separate ANZ-Roy Morgan consumer data reinforced the same inflation theme, with household expectations holding at 4.7% and appetite for big-ticket purchases weakening further. Even so, overall consumer sentiment remained 18 points above its April low.
Gordon said the combination of resilient activity and persistent price pressure leaves little room for the central bank to ease.
"That leaves the RBNZ on track to continue removing monetary stimulus in the months ahead," he wrote.
What it means for advisers
For mortgage advisers, the survey points to a market unlikely to see borrowing costs ease soon.
ANZ Research summed up the mood: "The August Business Outlook survey paints a picture of firms who are keen to get on with things despite a volatile global economic backdrop," ANZ Research said, adding that "the lift in past activity suggests the bounce-back is already underway."
With business inflation expectations rising and household sentiment still cautious on major purchases, advisers should prepare first-home buyers and property investors for a continued wait on any near-term relief in mortgage rates.
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