The New Zealand Institute of Economic Research (NZIER) has released the findings of its quarterly survey that indicate the country’s business confidence improved slightly in June despite the economy still being in recessionary territory. Based on seasonally adjusted figures, 59% of surveyed firms expect the economic conditions to deteriorate, down from 63% recorded in the first quarter.
Kiwibank economists also anticipate the economy to register weak growth as the slight improvement in business confidence has been accompanied by worsening levels of activity. 17% of firms expect domestic trading activity to fall, compared to just 8% that had similar expectations in the first quarter. While the downbeat mood was spread across all industries, the retail sector appeared to be the most bearish on the economic outlook.
The survey also found that there was a decline in capacity pressures thanks to rising net migration that has enabled more businesses that had been combating labour shortages to boost their activity and profitability. This has led to 37% of firms now reporting difficulty in finding skilled staff, compared to 44% in the previous quarter. A substantially lesser 11% of firms also reported difficulty finding unskilled staff, compared to 37% in the previous quarter. There has also been a 5% increase in employee headcount recorded in June, with businesses expecting to boost their workforce by another 4% in the current quarter.
An ANZ Bank survey produced similar results, indicating that 18% of respondents anticipate the economy to decline over the forthcoming year, down from 31.1% recorded in an earlier poll in May. 2.7% of businesses also expect to register growth, down from 4.5% of respondents surveyed a month ago. ANZ chief economist, Sharon Zollner, confirmed that while activity levels remained subdued for the most part, businesses appeared to be cautiously optimistic.
The fall in business pessimism has been linked to news that the Reserve Bank will be pausing interest rate hikes. This has led to the first surge in optimism in 14 months. The retail construction sector was found to be feeling more upbeat as there were increased expectations that the housing market has found a floor.
Despite the optimism of the surveys, forex trade appears to be unmoved with the NZ dollar climbing to its highest level since November 2021. This comes shortly after the US Federal Reserve Chair, Jerome Powell, confirmed that there were likely to be two more interest rate hikes before the end of the year. As of June 29, the NZD/USD exchange rate had reached a three-week low, dipping as much as 0.6068 during the late phase of the Asian trading session.
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