Business confidence and investment intentions are starting to improve despite the second round of COVID-19 restrictions, a bank survey shows.
A preliminary survey of 254 New Zealand businesses conducted by ANZ over the first week of September saw confidence lift 16 points compared to August. Around a quarter (a net 26 percent) of businesses expected things to get worse, down from a net 41.8 percent in August.
A net 10 percent of businesses expected their own activity to drop, an 8-point improvement.
"For business 'own activity', a read of -10 percent is still very bad compared to +17 percent in December, but it’s preferable to -55 percent in April," the report said.
"For now, things appear to be firmly in the 'could be worse' basket."
Investment intentions increased by 14 points, with just 1.2 percent of businesses expecting to cut back on investment. A net 14.3 percent expected to cut back on staff - an improvement from almost a quarter of businesses (23.6 percent) in August.
Export intentions improved by 15 points, with a net 4.5 percent of businesses expecting volumes to drop.
A net 28.7 percent of businesses expected profit to increase, a significant improvement from a net 70 percent in April.
Cost expectations and pricing intentions increased month-on-month.
"A much higher proportion of firms [are] anticipating higher costs than are anticipating raising prices, a hat tip to a more subdued demand environment overall," ANZ chief economist Sharon Zollner said.
Although the country is still in COVID-19 alert levels 2 and 2.5, these latest indicators show business sentiment is starting to improve. Many were at the highest level since February, but still well-down on pre-COVID levels.
Economic stimulus, such as wage subsidies, have injected more money into the economy. But a drop in incomes and an increase in unemployment were expected as a result of the pandemic.
"The wage subsidies are rolling off from about now onwards, which reveal the true state of the labour market," Zollner said.
Prolonged border closures are likely to impact the economy for a while yet.
"The exceptionally strong seasonality of tourism means that the national income hit associated with the closed border will only start being felt in full force from October," she added.