The ANZ Business Outlook results made uninspiring reading in May as all aggregate activity indicators were either flat or falling, ANZ senior economist Sharon Zollner said last week.
The economy was still in good share through fiscal stimulus and the record-high terms of trade. But it might be tiring. Both headline business confidence and firms' views of their own activity fell four points in May.
In terms of expectations regarding their own activity, retail and construction industries were dragging the chain, she said.
A net 27% of businesses were pessimistic about the year ahead. Firms' own views of their own activity - which had the stronger correlation with GDP growth - dipped from 18 to 14, the lowest reading since November.
In a surprise reading, agriculture confidence lifted. Construction was flat at low levels and retail fell 10 points to match it as the equal lowest confidence industry, Ms Zollner said.
A net 3% of firms were expecting to lift investment, down four points. Investment intentions had been in single digits for five of the past six months. Profit expectations fell eight points to (minus) -9%, firmly in the red.
Employment intentions eased from 9% to 7%. Construction industry employment intentions fell sharply. Excluding construction, the data was flat. A net 28% of businesses expected it to be tougher to get credit, from 26% in April.
Westpac senior economist Michael Gordon said May was a relatively eventful month, with Budget 2018, which offered little for businesses other than the R&D tax credit, the sharp rise in fuel prices to a record high, and the Government's decision on how to address the Mycoplasma bovis outbreak.
“However, the survey likely pre-dated most of this and we may see some more telling responses next month.”
Westpac economic forecasts incorporated a lull in hiring and investment in 2018 on the back of uncertainty around the impact of the new Government. That was consistent with firms' expressed intentions in the ANZ survey, he said.
“We will continue to watch for signs that this is turning into action.”
The ANZ consumer confidence index recorded confidence steady at 121 in May, sitting slightly above its historical average. Both the current and future conditions indices were little changed.
Ms Zollner said households were feel good due to a strong labour market and still-low interest rates. But they were not gung ho.
“In our view, the household savings rate needs to lift from here so middle-of-the-road confidence is not a bad thing.”
*Dene Mackenzie is business editor of the Otago Daily Times.