Business confidence up 13 points in June

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Businesses are becoming more optimistic about the economy. (File photo)
Photo: 123rf.com

The level of business pessimism is falling as firms are encouraged by the Reserve Bank signalling a halt to interest rates rises.

ANZ Bank’s June business confidence survey showed a net 18 percent expect the economy to get worse, compared with 31 percent the month before.

The businesses’ own activity measure turned optimistic for the first time in 14 months to 3 percent.

Chief economist Sharon Zollner said businesses had been buoyed by the Reserve Bank’s signal that interest rates rises may be over.

“June saw activity indicators lift in a reasonably broad-based fashion.

“While the levels of many are still subdued, firms appear to be cautiously optimistic that the worst may be over.”

Headline inflation and pricing indicators continued to slowly ease.

Inflation expectations had the steepest downward trend, but were still elevated at 5.29 percent compared to 5.47 percent the month before.

The fall in the net proportion of firms expecting higher costs was particularly marked this month.

“Encouragingly, a general downtrend continues to be evident in firms’ expected costs in three months’ time relative to today,” Zollner said.

“The data imply that on average, firms continue to expect margin compression, given costs are expected to lift more than prices.”

However, she said despite the June survey seeing a lift of sentiment that was widespread, uncertainty remained.

“Times remain very uncertain for businesses, and pressure on profitability from high costs and in some cases, lower turnover, persists.

“But there are positives too – firms appear to have taken heart from the RBNZ calling a halt to hikes.”

“Increasingly widespread expectations that the housing market has found a floor appear to be offering glimmers of hope for the residential construction sector, and finding labour has clearly become much easier as workers have poured in through the border, alleviating a significant source of stress for businesses.

“Of course, capping any upside is the fact the RBNZ is wanting to see subdued demand for a period.”

Pressure on profitability from high costs and in some cases lower turnover persisted.