Business confidence drops three months in a row
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Business confidence has retreated for a third month in a row as businesses struggle to recover costs, and uncertainty over trade policies overshadowed signs of an improving economy.
ANZ's monthly sentiment headline measure fell 12 points to a net 37 percent of firms expecting an improvement in the year ahead. While the more closely followed measure of businesses' own outlooks dropped 13 points to 35 percent.
Chief economist Sharon Zollner said the survey still pointed to a recovering economy, but with headlines obscuring some of the positives.
"The economy is recovering, but it's still hard going here and now, and that it's still difficult to pass cost increases through to prices."
Zollner said a slight rise in inflation expectations to 2.71 percent was marginal, while firms expected a 2.5 percent rise in costs over the next few months but to be able to raise their prices by 1.7 percent.
"Overall, there are not any obvious grounds for the RBNZ to be overly concerned about the recent tick higher in some surveys of inflation expectations."
The survey showed firms expecting weaker profits, to invest less and pull back on hiring.
Zollner said there was plenty of scope for volatility sparked by tariff policies to change firms' opinions and activity, but for the time being the Reserve Bank had scope for more rate cuts to help the economy.
"We expect the RBNZ will ultimately take the Official Cash Rate to a low of 2.5 percent to shore up the economic recovery as it faces into global headwinds."
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