Business confidence and profit expectations eased slightly from October to November - but cost expectations are at all-time highs, a latest bank shows.
A preliminary survey of 240 New Zealand businesses conducted by ANZ over the first week of November showed a 5 point drop in business confidence compared to October. A net 18 percent of businesses expect general business conditions to worsen in 12 months' time, up from a net 13 percent in October.
Profit expectations fell three points in November, a net 9 percent of businesses expecting their profits to be lower in a year's time.
Overall, the results showed a degree of wariness as businesses came to terms with a "COVID-endemic world," ANZ economists said in the report. The one certainty is that "costs are through the roof".
The majority of businesses (89 percent) reported expectations of higher costs over the next three months, up 2 points from October. This was larger than the portion of businesses intending to raise their prices, at 65 percent.
ANZ chief economist Sharon Zollner told Newshub as cost rises are right across the economy, businesses are experiencing costs not seen in a long time.
Consumer demand for goods and services remained strong, she said. Anecdotal evidence indicated businesses had been surprised at the ease of passing on cost increases.
"Cost expectations (and pricing intentions) are pretty much at record highs...and they're going to do something about it," Zollner said.
In Auckland and Waikato, a net 10 percent of businesses reported lower activity than a year ago, a likely result of COVID-19 Delta restrictions.
"Auckland/Waikato firms had lower own activity expectations, capacity utilisation and export intentions than elsewhere, but higher (though still net negative) business confidence and profit expectations," ANZ said in the report.
Expectations of 'own activity', a measure of the volume of activity within a business, fell 6 points, 15 percent expecting their activity to increase in a year's time.
Employment intentions were up 5 points, with 16 percent of businesses intending to hire more staff.
Asked whether they thought it would be harder or easier to get credit, 65 percent of businesses expected it to be harder, up 8 points from October.
Export intentions dipped slightly in October, with 8 percent of businesses surveyed expecting their volume of exports to increase.
Following the 4.9 percent surge in annual price inflation for the September quarter, business's inflation expectations jumped from 3.45 percent to 4.33 percent.
In the first quarter of 2022, ANZ is forecasting inflation to hit 5.8 percent.
"For now, everything is pointing to a need for higher rates," Zollner added.
