ANZ SURVEY AND THE NZ ECONOMY
Mark Lister , 9 June 2017
There are many indicators that tell us how the economy is performing. Employment, inflation and retail sales are some of the higher profile ones, but there are dozens more. All considered together, these paint a fairly accurate picture of how things are going out there.
While every piece of information provides valuable insights, economy watchers will all have their favourites. One of mine is the ANZ Business Outlook survey.
ANZ surveys hundreds of businesses each month, asking a range of questions. These cover what they’re feeling about the economy in general, and specifically their own businesses. They’re asked if they plan on raising prices, whether they intend to hire more staff, and how easy they’re finding it to obtain credit.
I find this survey particularly useful for a few main reasons, and timeliness is one of those.
Most of the official economic statistics we see are out of date by the time they are released. For example, GDP growth figures for the March quarter will be out near the middle of this month. For those of us looking forward, that’s old news.
Unemployment and inflation are a bit timelier, but these still cover a period that is between one and fourth months in the past.
You get a much more up-to-date read on these important economic measures from the actual businesses that make up our economy. They’re the ones doing the hiring and setting prices, and they collectively see trends long before they emerge in the statistics.
Back in February, the part of this survey that asks firms about their pricing intentions hit the highest levels since mid-2014. This was well above recent averages, and clearly pointed to growing inflationary pressures.
Two months later, the official inflation statistics for that period were released. Lo and behold, inflation came in much stronger than expected, creating headlines and causing a minor shock to financial markets.
So what can we learn from the way New Zealand businesses have responded to the latest ANZ Business Outlook survey?
Well, things are looking up. Businesses are growing in confidence, and reporting trading conditions well above the long-term average. It’s across the board as well, with construction, manufacturing and agriculture all in good heart. The services sector is most positive of all, with tourism no doubt a driving force.
All of that bodes well for economic growth as well as further strength in the labour market, with hiring intentions rising to a three-month high.
We should also expect inflation and interest rates to creep higher. More firms are planning to raise their prices, and inflation expectations are the highest since 2014. Most are expecting interest rates to keep going up, while many are expecting it to get harder to borrow money.
No amount of analysis makes up for kicking a lot of tyres, or talking to business owners and investors. Do both together, and you’ve got your finger on the pulse of the nation.