According to the NZ Economics Team at Australia New Zealand bank (ANZ), the latest business surveys paint a weaker picture for economic growth in New Zealand going forward.
Key quotes:
The QSBO survey for Q3 was very weak, adding downside risk to even our subdued growth forecasts. So what is going on? Global growth is clearly cooling, but New Zealand has been largely shielded so far – at least our commodity prices have been. But tourism is feeling it, as is the business sentiment, and that’s starting to hurt investment and employment.
And export intentions indicate trouble. Net migration estimates are holding up, but we see some risk it could be revised lower – meaning lower net migration might have been a bigger part of slowing growth than is currently recognised.
What about the supply side? Domestically, firms are still concerned about capacity constraints, but there are signs that this is easing, with some indicators suggesting labour is becoming less difficult to find and weaker demand is becoming a greater issue. Amidst all this, the household sector is still holding up. But if they seriously retrench, it’s game over.
For the RBNZ in particular, the inflation side of the QSBO report will be concerning. Pricing intentions slipped in Q3 from a net 13% to 7%, and experienced price rises also fell, from a net 12% to -1%. Cost pressures also dropped, with experienced costs down to a net 33% of firms reporting an increase (from 43%). Together with a weakening across capacity measures, this suggests that while inflation might have held up in Q3, it won’t be strong for long.
That the economy is slowing is now patently clear to all. Not just the QSBO but also other survey data like the ANZ Confidence Composite, which combines information from the ANZ Business Outlook and the ANZ Consumer Confidence Survey, have been showing it for a while; so too has harder data like the ANZ Truckometer indexes. The signals are pretty clear that GDP growth is going to continue to wane until at least the end of the year.
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