30 Apr 2019

Mood of business flat as economy's soft patch extends

3:22 pm on 30 April 2019

The latest read on business confidence has come in flat - suggesting the economy might be experiencing something of a weaker period.

Business confidence declining generic graphic

ANZ's Business confidence survey for April has remained the same - 38 percent of businesses expect economic conditions to deteriorate. Photo: 123rf.com

The ANZ April Business Outlook survey showed a net 38 percent of businesses expect conditions to deteriorate in the year ahead, the same result as in March, when there was a 7 point fall in confidence.

Firms' feelings about their own activity lifted slightly in April, up a point to a net 7 percent of companies expecting an improvement.

ANZ chief economist Sharon Zollner said the economy was experiencing a soft patch which was proving reasonably long lasting and she expected it to continue into the middle of the year.

"However, beyond that, easier monetary conditions and policy certainty should see momentum recover, assuming the global outlook continues to improve. "

Importantly, the April survey was conducted prior to the government throwing out the idea of a capital gains tax.

The issue was one which had previously appeared in business confidence surveys as weighing on the minds of businesses.

Profit expectations rose in the survey as did employment intentions, and Ms Zollner said she expected cost pressures on firms to ease off as capacity pressures wane.

"But inflation is not yet where it needs to be and activity indicators are yet to turn upwards. Accordingly, we expect the RBNZ to cut the OCR, starting in August, to support the outlook for both growth and inflation."

The survey found a net 30 percent of firms expected lower interest rates, versus 12 percent last month.