ANZ said business confidence was up. (File photo) Photo: RNZ / Marika Khabazi
- Business confidence rises to 58 pct in October: ANZ survey
- Employment indicators remain weak
- Inflation expectations remain anchored
- ANZ says "green shoots" of recovery starting
Business confidence has risen to an eight-month high led by retail on the back of the most recent Reserve Bank rate cut.
ANZ's monthly sentiment survey showed the headline measure rising to a net 58 percent confidence, the best result since February.
The more closely followed measure of businesses' own activity rose to a net 45 percent, led by retail, its best reading since April.
ANZ senior economist Miles Workman said forward-looking activity indicators generally lifted in October.
"Reported past activity is suddenly looking much brighter for retail, with its highest read in four years, but construction remains under significant pressure."
Miles Workman is a senior economist at ANZ. (File photo) Photo: Supplied
He said inflation expectations remain anchored, which was good news, but the rise in activity and confidence did not lead to an increase in hiring.
"Reported past employment remains negative for every sector except agriculture but seems to have found a floor in aggregate," Workman said.
Workman believed green shoots were emerging for an economic recovery, especially for interest-rate sensitive sectors like retail and construction, but stark regional differences persisted.
"There is marked regional divergence in the survey results," Workman said. "Canterbury stands out, with its strong agriculture backbone, while Wellington has lagged for more than a year."
He said businesses would not start hiring until they felt the recovery was not a false dawn like earlier this year.
"The question is, will firms trust them to thrive and not to wither, as they did earlier this year? The pieces are in place for a cyclical recovery, though we are expecting growth to be modest; recovery takes time."
Overall, the economy had made painful adjustments in recent years that left it better placed to emerge from the downturn.
"Real house prices have unwound their bubble, household and firm debt is now lower than pre-Covid as a share of GDP, inflation has been beaten down, and external balance with the rest of the world has been restored as imports have reduced and exports grown," Workman said.
He said the recovery in retail was a sign lower interest rates were finally working.
"The pick-up in retail sentiment underlines that as the weather warms the economy is set to do the same, with significant monetary easing working its way through and high rural incomes supporting activity and confidence in the regions."
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